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.