While our congressional representatives debate in Washington, D.C. about a very controversial bill aimed at saving our economic system from a total meltdown, a very similar crisis, albeit on a much smaller scale, is looming right here in Glasgow. That statement is not made to sound overly dark, but October 1 is the day that the largest increase in the cost of TVA electric power in many decades takes effect. So, in an odd sort of fashion, the pursuit of light is setting us up for economic darkness.

Nationally the proliferation of variable rate mortgages is said to be the chief cause of our economic distress. As the interest rate on those mortgages spiraled upward, many have not been able to make the larger payments. The result has been that thousands of families have seen their homes repossessed and that has resulted in the general reduction in value of all of our homes. Thus, banks who secured loans based upon the inflated values of the real estate, have become insolvent because they cannot sell the repossessed homes at anywhere near what they thought they would be worth. But you did not come here for my explanation of the national economic crisis.

The point is that the situation here in Glasgow is eerily similar to our national situation. Instead of variable rate mortgages, all of us are facing variable rate energy bills. In particular, your electric power bill from the EPB, depending on how much electricity you use and where you use it, just went up around twenty percent. For many in Glasgow that increase will be quite painful. For many more, the increase will be the “straw that breaks the camel’s back” relative to their personal finances. More folks than ever will face termination of their electric service due to their inability to pay their bill and that will send ripples throughout our local economy. The EPB certainly does not look forward to increasing the number of electric service terminations, but we don't really have any other tools to use since any amount of electricity not paid for by one customer is ultimately paid for by the rest of the customers. So far, the rest of the customers have been unwilling to subsidize those who cannot pay. Meanwhile, even folks who can tighten their belt enough to deal with this increase will also contribute to the destabilization of Glasgow’s economy simply because this rate increase, should it stay in place for a year, will extract an additional $4 million from our local economy! That means every church, charity, and non-profit agency that depends on contributions from locals to survive will feel the pressure. Four million dollars is so much, when pulled from a community the size of Glasgow in one year, that none of us will be able to avoid feeling the impact.

The national economic crisis generally results from the unmitigated greed of several folks with Wall Street work addresses. Our local energy-derived economic crisis comes from many years of TVA rates which encouraged us all to use energy as if it were a limitless resource. As a result, we have all become addicted to cheap and abundant energy but now the supply is suddenly expensive and very finite. I am not at all sure which of those sins is the more damaging. Nationally, our congress will likely vote to rescue the Wall Street sinners by borrowing more money from China, Germany, and Russia. Locally, your rescue might come from a number of actions, but being saved by Congress is not on the list possibilities. First, you could redouble your efforts to use less electric power (you know how to do this, just turn thermostats down and appliances off). Next, you could offer up effective prayers for rain (TVA can make really low-cost power with their hydroelectric dams, but those need to be attached to reservoirs full of water, and for the last couple of years they have been at record lows due to persistent drought.). Finally, you might get ready to embrace a new electric rate environment wherein you will save money by moving your electric power consumption to off-peak times (this is the savior we have been hoping for over the last several years but TVA is glacially slow at delivering to us).

Of course, no discussion about our economy can take place without also mentioning that localism, making every possible effort to buy your needs from locally owned businesses, is also a great way to blunt the impact of this economic crisis. TVA has just opened up a huge new hole through which lots of money will drain away from our local economy. Meanwhile, you have the power to start sealing that hole by trapping more money in our local economy. Whatever you buy, think about how you can buy it from a local merchant first. It might be a long process of encouraging more local folks to offer the goods and services that we all need, but even the journey of one thousand miles begins with the first step!

Later this week the news that we have been warning our customers about for the last couple of months will finally become official -- TVA will announce that the cost of electric power in Glasgow will again increase sharply on October 1. I am still forecasting something in the 15% range. Of course, everyone will be upset over this announcement, but what no one will likely mention is that another increase of this magnitude is likely to occur again on January 1, 2009. Instead of quoting what this increase will cost some imaginary "average" homeowner, let's just make it easier. Drag out your most recent electric bill and look at the electricity portion of the bill. Add 15% to that cost and you will see the sort of impact this is going to have on your budget.

The real shame about this is that the regular person, who is already challenged by the rapidly increasing cost of everything they need to survive, had little, if anything, to do with the real causes for these rapid increases in the cost of electric power. While it is true that TVA is facing upward pressure on their rates due to drought conditions that have limited their hydroelectric power capacity and sharp increases in the cost of coal and natural gas (both items that they purchase and burn to produce electricity), the real cause of this pain is a wholesale rate policy that has existed for the last twenty years. This rate structure has given the signal to everyone that there is an infinite supply of energy and that we should use all of it that we possibly could.

Additionally, TVA's economic development team has continued to pursue new development and has begged new industries to locate in the TVA region, even when they knew that they did not have the native generation capacity to serve those new loads. As a result, each new celebration for the announcement of a new factory locating in the region has been followed by a frenzy of telephone calls to TVA's neighbors in which TVA's power supply planning folks had to make deals to purchase energy from those neighbors to serve the new factory. The really nutty thing about that is the fact that TVA has had to pay much more for the energy purchased from those neighbors than what they are charging the new factories for that energy. Most thinking folks would see that such a "buy high - sell low" philosophy will not work without the rest of the existing customers being willing to pay more so the new loads can be subsidized. When December and January roll around, and you are staggered by the bill for the electricity you are using, try to remember how good you are supposed to feel about the new Toyota plant in Mississippi and the recently announced Volkswagen plant which is locating in Chattanooga. You are helping purchase the electric power for them!

It is too late now, but if only our leadership could have read this article back in 1990, and if they had the guts to follow its advice, we could be living in an energy "garden of eden" by now. It is a shame, because, as a result of a lack of leadership and our lack of demanding it, we are now about to be cast out of paradise, doomed to walk in the equivalent of energy purgatory for the foreseeable future. As I have said before, the energy cost options look more promising in Glasgow than those of most of the other TVA cities, but even here, things are going to get worse before they start getting better.

Even though many of the stars and planets are difficult to see from downtown Glasgow through our man-made veil of street lights, enough of them are visible during my nightly dog-walking excursions to create a breathtaking display. However, of late it seems that each visible body in the heavens simply represents one of the problems we face as a society. There are thousands of personal crises, mine, yours, and our neighbor’s, to be represented yet only known by the individuals staggering under the weight of those problems. There are issues related only to our little community of Glasgow. There are statewide and regional problems to be assigned their own stars as well. Finally, there are nationwide and worldwide matters that also must be represented in our night sky. Taken all together, there are then thousands of stars in our night sky of issues.

As an engineer, it is impossible for me to look upon heavens full of problems without proposing a solution that might, at least, extinguish the glow of a large number of those troubles. Twenty years ago we proposed a grand solution to many of Glasgow’s problems when we started construction of the first municipally owned broadband network in the U.S. That solution has worked well for many of our problems in Glasgow, but now we dream of expanding upon what we have learned here to further enhance our network in Glasgow while solving problems for our state and our region.

Here is what we mean. Many of the problems in our present night sky are related to energy. The cost of electric power, natural gas, gasoline, and diesel fuel are spiraling upward and that is impacting everything in our lives. TVA is increasing electric power rates and promising more of the same in the future as they struggle to build new generating plants to meet the growing demand for electric power. The numbers are staggering. They are about 2,000 megawatts short of the capacity they need right now to meet their demand ( a megawatt is equal to 1,000 kilowatts and the average home in Glasgow requires about 10 kilowatts of capacity, so, a megawatt would serve about 100 Glasgow homes). They are looking to nuclear power for the new generation units since the outlook for additional coal-fired generation is murky, at best. They project the cost of building new nuclear units at somewhere between $2,000 and $4,000 per kilowatt. So, by their own figures, the project expenditures of more than $18 billion over the next ten years to add the capacity they need.

At a recent meeting of TVA officials and the distributors of TVA power, these figures were discussed along with some preliminary plans for actually reducing our demand for electric power, I had an opportunity to compare what we know about building advanced broadband networks to the amount of money TVA is looking to spend over the next ten years on concrete, steel, and nuclear reactor vessels. The comparison ignited a blinding flash of inspiration in which I saw a single thread connecting many of our problems. That thread is a fiber optic cable and here is how I think it could solve our problems.

We are doing a test project in Glasgow wherein a portion of our old coaxial cable-based broadband plant is being converted to the latest fiber-to-the-home (FTTH) configuration. In a FTTH network, all the cable television, telephone, internet, and electric metering information coming to and from your home is carried via light waves. This means that the capacity and speed of the data traveling to and from the home is virtually unlimited. We think this is the be-all and end-all network configuration that will serve the homes connected to it for twenty, or more, years without fear of obsolescence. Further, our experience shows that this advanced network can be accomplished for about $2,000 per home connected. Keep that number in your head.

Now let’s return to TVA’s forecast of $2,000 to $4,000 per kilowatt for new nuclear generation capacity. In fact, to be abundantly conservative, let’s assume (and this is a very far reaching assumption for any TVA project) that they can build new capacity for $2,000 per kilowatt. That would mean that they are willing to pay the same thing per kilowatt of new capacity as we know it would cost to establish FTTH broadband to a home. If they are looking at spending $18 billion that same money would get FTTH to nine million homes. Curiously, that is about the total number of customers TVA serves over the seven state region. Stay with me on this.

If TVA had an unlimited capacity data connection to every home, they could use that connection to control thermostats on heating, air conditioning, water heating, freezers, refrigerators, washing machines, clothes dryers, dishwashers, etc. That sort of control would easily allow them to shave one, probably two, likely even three to four kilowatts of demand off of their peak demand. So, spending that money on broadband networks for every home and business in the Tennessee Valley region would likely double or triple the capacity improvement they are looking to get through building new nuclear plants! So, if they built FTTH instead of more reactor vessels, they would be increasing their net capacity by actually reducing demand during peak times. Since this same amount of money would double or triple the net capacity impact that they anticipate by simply building more units, they could actually shut down a filthy coal unit or two instead! There is no more earth friendly way to add capacity to an electric system than by acting to reduce demand. No new fuel is needed for this solution. No new operating costs are added. No future nuclear fuel disposal costs are added. This is the most “green” energy that exists. At the same time, everyone would get an advanced broadband connection with infinite capacity and speed for free! In addition, widespread use of broadband could have meaningful impact on the use of other fuels. More shopping on-line, more telecommuting, more movement of the message instead of the messenger would reduce other forms of energy consumption and all of these reductions would bring immediate benefits to the region.

What would our region look like with nine million homes connected to a robust FTTH network? Well, for starters employment would skyrocket. Folks would be needed in all sorts of manufacturing plants to make the cables, electronics, hardware, and software to provide all of the plant necessary to accomplish this undertaking. Scores of folks would go to work building the networks. Hundreds of cities and towns in our region connected with FTTH would also bring all sorts of new businesses. Major internet retailers would want to locate servers in our region to tap the wealth of bandwidth. With those businesses would come software and hardware engineers and the corresponding increased demand for an educated workforce. True, the construction of new nuclear plants would employ a lot of folks as well. But the FTTH solution would spread that employment across hundreds of cities and towns instead of one or two sites. In fact, the FTTH solution would more closely mimic the model of TVA itself as TVA would, once again, be extending the latest technology to every home and business throughout the multi-state region. TVA would be back in the business of democratizing technology – making it cheap and available to all. The heady days of the late 30's and 40's could return to our region.

Of course, this solution to so many of our problems would also create a few political problems. Very rich companies like AT&T and Comcast and other well entrenched monopolies would howl in protest. Those howls would be eerily reminiscent of the chorus of howls that private power companies offered up to Congress as Senator George Norris fought to create TVA in the first place. Private power companies were adamantly opposed to TVA building out electric power networks and replacing the private 12 cent kilowatt-hours with public 3 cent kilowatt-hours. Still, TVA was created and the history of electric power for all came with it.

But that was 1933 and we had leaders like George Norris, Franklin Roosevelt, David Lilienthal, and others who could care less if the rich ceased to get richer. In those days they saw the sky full of different problem-stars. They included an unruly Tennessee River, a depressed region of the United States, land that had been depleted of its agricultural value through greedy deforestation, short life spans due to back-breaking manual labor in the absence of electric power, and the need for a way to produce defense products through use of the natural resources of the region. They saw all of those problems and crafted an unusual solution aimed at making improvements in all of them. George Norris, who brought TVA into existence 75 years ago this April saw the democratization of technology through a government entity like TVA as a natural role of government. He convinced Franklin Roosevelt that one means by which democracy could combat the forces of entrenched and organized greed is through the use of government. “A government,” Norris said, “in the truest sense is only a method to bring to humanity the greatest amount of happiness.” It seems to me that TVA could bring happiness to nine millions homes more effectively with ubiquitous FTTH networks than with a few more nuclear reactors.

But George Norris is gone, and with him most of the leadership that might share this idea for a better method to solve our electric power, employment, development, and broadband network problems, and that is a shame. Shortly after having this vision we shared it with a couple of the members of the present TVA management team and their yawns were deafening. So, we seem to be headed toward a continuation of the present momentum to consume more than we have the capacity to provide and to saddle the people of the region with increasing debt and energy costs when there is such an elegant solution right in front of us. Still, when I look up into the sky tonight, I will still see that thread of possibility connecting the dots of so many of our problems and wonder why we fight so hard to keep the fires of discontent burning. I wonder what George Norris would have thought of this idea.

If you purchase your electric power from the Glasgow EPB, or any other utility that sells TVA power, your cost of electric power will be going up over ten percent on April 1. This latest increase will mean that the cost of electricity in our region has gone up 33% in the last five years. While the local newspaper already trumpeted this simple information to you as a giant headline, this post will explore the underlying reasons for the escalating cost of electric power in our region. You will note that it has alarming parallels to the same increases we have seen in the cost of gasoline and our intake of calories in our food.

TVA explains that these increases flow from our steadily increasing appetite for more electric power, and a steadily decreasing flow of water into their reservoirs that they can convert to electric power. From the most simplistic point of view, this reasoning is correct. However, a bit of digging unearths some shocking artifacts that go a long way toward explaining where we got this tremendous appetite for electric power and why TVA is unable to produce enough to satisfy our lust for electrons. Just like our present tendency to overeat and become obese, we are doing the same thing relative to energy consumption, but we are being driven to eat poorly by a food industry that is convincing us to do so by lacing nearly everything we eat with high fructose corn syrup, and we are becoming energy hogs at the hands of a wholesale energy supplier that employs a rate structure that also drives us to pig out.

These large cost increases for electricity are being implemented because, if we continue to grow our demand for electric power at our present rate, TVA will need to build several new generating units, including nuclear power plants, over the next few years. They need this new generation because, during about four or five hours a day in the winter and summer, TVA sells us more electricity than they have the capacity to produce. That’s right, they cannot make all of the power we are using! So, they are going out on the open market and paying whatever they must to purchase power for our demands during those peak times. Recent drought has just made this problem much worse. Electricity made by spinning turbines at dams as the water drains from a lake into a river is the least expensive and least environmentally damaging power we can make. When the lakes do not have enough water in them to do this, TVA must replace that power with extremely expensive power from a neighbor, if that neighbor has extra power to sell.

You or I would look at this capacity shortage and make some quick and simple decisions. One thing is certain, we would not be trying to convince anyone to use more power! However, TVA still chooses to live in some alternate reality which ignores this shortage of capacity and still pays industries to add more electric demand (through a program they call Enhanced Growth Credit Program), and their odd responses to a shortage of generating capacity certainly don’t stop there.

Anyone who has to pay their electricity bill at home has a good idea how much electricity it takes to heat and cool a big box retail store. These mega stores also have mega appetites for energy. So, if you were short on energy, almost anyone (at least anyone with a firm grasp on reality who was in the energy business) would look at these sorts of buildings and decide to discourage them by charging more for the massive amounts of energy these buildings require. But, as a TVA distributor, we are forced to charge these gigantic customers less per kWh than what we charge a regular small corner deli or gasoline station! Heck, they even pay less per kWh than you and I pay at our homes. That means we (when I say “we” that means you and me) are subsidizing these massive retail businesses who, in turn, extract massive amounts of money from our community, by charging them less per kWh for electricity than what we charge a small local entrepreneur who struggles to compete with one of these behemoths. We do that even though the small business presents much less of a burden on the electric system than the big business. Shaking your head yet? Well, read on, you haven’t even started getting to the really crazy stuff.

At meeting after meeting, where TVA calls together the power distributors to give us the bad news about another rate increase, they methodically display slides which depict the staggering growth of electrical demand and the growing shortage of their capacity to produce that amount of power. They clearly need more money to purchase more power to tide them over until they can build, get this, possibly $18 billion worth of new nuclear and other generation units over the next ten years. There is always great wringing of hands and gnashing of teeth, combined with promises to develop new methods, rates, and technologies to help lower the growth of energy usage in our region, but at the same time, look at what is going on in north Mississippi for an example that makes you wonder if they will ever be serious about working to reduce the growth of energy demand.

Just over a year ago Toyota announced that they would build a huge new production facility just outside Tupelo, an area also served by TVA. True to form for all such announcements over the last twenty years, the state of Mississippi, at the urging of throngs of “economic development” professionals, offered “incentives” for Toyota to locate the plant there which will cost the people of Mississippi roughly $200,000 per job created. But wait, there is more. Since TVA is already unable to generate enough electricity to serve its existing customers, they will need to build an additional amount of generation (something north of 25 megawatts of capacity will be needed according to published reports, but this number is likely to be several times this size when the total impact of this facility is finally known)to serve this facility. The cost of adding another 25 megawatts of nuclear generation capacity will be about $75 million. So, if we add that “incentive” to the $200,000 already granted by the people of Mississippi, we are up to about $240,000 per job created! The really bad thing about the additional $40,000 per job is that the people of Mississippi are not exclusively funding that incentive. WE are their partners in that one. The additional cost of this new generation will become part of what each of us in the TVA region will pay in additional future increases to our cost of electricity. While I am certain that those two thousand new Toyota employees in Mississippi will appreciate our kindness, I am not certain that any of us really want to make that donation! Personally, if I were a potential employee in Tupelo I would rather have the $240,000 than the job. At any rate, I do not like being forced to make donations to Toyota, a company that is already doing fine without me, and this is just one of many such projects we are attempting to land even though we don't have the capacity to serve them.

Do you see the parallels now? Decades of relatively cheap oil resulted in our attraction to gas-guzzling trucks and SUV’s and an addiction to food which has traveled more extensively than most of those who consume it. Now we are becoming very sorry for our addiction. Similarly, cheap electric power coupled with confused leaders, who think the only way to measure success is by counting the number of ceremonial shovels they have used in breaking ground for another new building to house an industry they just attracted by giving away the farm, combined to create our record breaking demand for electric power. Now that mistake is haunting us as well.

It is true that your cost of electric power is going up again on April 1 and much of the reason for the continued increase in the cost of electricity is because of our increased demand for power. But most of that increased demand is not a result of your personal wasteful ways. True, you have likely added a refrigerator or a DVD player over the years, but you are allowing those appliances to run during that peak afternoon time in the summer and early morning time during the winter because you have not been told not to do so. Rather, our rates have been telling you to use all you want, whenever you want to use it, and that line of reasoning has been faulted since its inception. Our real problems with lack of generating capacity come from the ridiculous kinds of messages we have been sending big-box retail store developers and the ingenious moves like the one we are making just outside Tupelo, Mississippi where we are going to sell power we do not have, at a rate below what it costs us to deliver that power, to a company that requires neither to be successful. You can buy all of the compact florescent light bulbs you want but those are drips in the ocean compared to the waste which flows from our leadership’s predilection to constant growth.

Meanwhile, your donations to the antiquated principle of all growth is good will go up sharply in April. That is a date certain. The date when TVA will finally start offering real alternatives and incentives to encourage us to reduce our energy usage during peak times is still to be determined.

The record heat wave of August has done more than killing off our grass and flowers, it has evaporated the shroud which has hidden some of the dirtiest secrets of the energy business. You say you have not noticed this? You will, dear readers, you will.

Before we get too deep into this newsletter, I want to admit that it was heavily influenced by a book by Bill McKibben, Deep Economy. It is a fantastic book and is largely responsible for any traces of wisdom that might be found herein.

On the surface, TVA’s philosophy about the energy business, since the mid-70's, has operated on one consistent maxim: All good things come from relentless growth. Over the last couple of years, and in particular over the last month, even TVA has begun to realize that More no longer always equals Better. In fact, More is becoming much more closely aligned with Miserable than Better.

How did we arrive at this point? Well, it took a lot of commitment to the belief that More always brings Better by TVA management over several decades. They pursued that belief in many, many ways. They started, but then soon killed, a home weatherization program that was doing a great job of helping homes use less energy (Why? Because it was not producing More sales of energy!), they operate a hyper-aggressive industry recruitment program that has never seen an industry they did not think would look great in any TVA community, but the worst damage has been done by the rate structure they implemented about 15 years ago. Everyone in the energy business knows that power costs more to produce and deliver during certain hours of the day when overall usage peaks. TVA knows that too, but instead of recognizing that reality and creating a rate environment which acknowledges that and charges us proportionately, they use a simple rate that ignores that reality and, instead, sends everyone the message that all energy costs the same thing, no matter when you use it.

So, if you send out the message every month that there is an unlimited supply of electricity and you should use a lot of it and use it whenever you want, what would you guess might happen? That’s right! We all started to use a lot more energy. In fact, even with some large industries in Glasgow shutting down and scaling back, we continue to set new record peak electrical demands every year (we set four new all-time records in August alone). Electric power usage has grown so much that TVA soon is selling more electric power than they can produce. So, what do they do? They go out on the open market and buy more expensive power from their neighbors! That’s right, during the peak hours of the day in Glasgow there is a high likelihood that the electricity keeping your air conditioner running is actually coming from KU or LG&E or any of a number of neighboring systems.

So did this shortfall cause TVA to begin questioning if More always leads to Better? Nope.
In fact, in the midst of this shortage, TVA is actually offering some large customers an incentive to add additional machinery and buy more power (I swear I am not making this up!)! In TVA’s world, it makes perfect sense to pay a customer to add electricity demand, then sell that customer power during peak times at a price far lower than their cost of buying that power from others. That is the power of unlimited belief in More always brings Better.

TVA is not the only villain in this play. There are examples of this faulted dedication to that old belief in many other segments of our economy. Certain elements of our banking industry have felt that more home construction and speculation is always better too. Heard about the fear in our financial markets due to the sub-prime mortgages and the spiraling examples of folks in default on the payments (these defaults jumped 93% in July compared to July of 2006)? This is just another example of business pursuing More at all costs. In the real world, everyone cannot afford the house they wish for. Still, many financial institutions have been lending out money at great risk, counting on the belief that More loans will equal Better profits in all cases. Somehow, no one bothered figuring out where we were going to get the money to pay for all the money we were being offered. That is just as wrong, and just as damaging to our economy, as TVA believing that selling more energy at a cost lower than their cost of buying it, while paying some of us to use more, will result in more prosperity for us all. The actual result is greater cost for most of us in return for savings and increased profit for a few. The folks being hired to build new power plants are not complaining!

You will personally experience this matter on October 1 when TVA’s “fuel cost adjustment” mechanism will increase your electric rates by about 5% to help them pay for the increased cost of coal, and other fuels, and the massive cost of the power they have been buying from the neighbors to supply the demand they encouraged us to create, but that they did not have the capacity to produce. In this case More did lead to Better, just not for us, rather, for the stockholders of LG&E and the other companies that sold the power to TVA. Does that make you feel better?

While this 5% increase is only part of their quarterly adjustment pattern, which means it technically could go away three months later, the impact on Glasgow’s economy is dramatic. In just three months this increase will cost our community more than $320,000! While we struggle with trying to save the community $200,000 per year by not adding cable programming like The Disney Channel and Fox Sports South, TVA’s devotion to More can sweep $320,000 out of the community in three months without even so much as a thank-you note. These are the kinds of defeats that make the battle hard to continue. No matter how hard we fight for our community’s economy, someone bigger and more powerful is always there to squash our efforts.

So, as we wind down the summer which brought us more heat, more energy consumption, more water consumption, more fear of collapse of our financial system, and more realization that our bridges, highways, electric networks, and other crucial infrastructure needs more maintenance, we contemplate whether the road to More can still take us to the land of Better. Do the people of Minneapolis now want more roads which can be named after some fat-cat politician, or would they like to have the money spent for unglamorous maintenance work on existing bridges? Do the people longing for their lost loved ones in collapsed coal mines want us to burn more coal which leads to even more risky mining activity? Do you want to keep paying more for electricity so that TVA can continue to reward some folks for using more energy? Clearly, some of us are learning about the peril of unflagging devotion to More. More does not lead to Better in 2007, and it likely never will again. Since us regular folk are now beginning to understand this, maybe we can start helping our leaders understand this as well. So let me be the first to utter this strange new theory . . . Less might actually lead us to Better.