TVA changes the way it calculates electric rates

Starting April 1, it will charge more for energy used during peak times in winter, summer

After more than two years of planning, the Tennessee Valley Authority will implement a new wholesale rate structure on April 1, 2011.

TVA’s new rate structure will be a big change for Ripley Power and Light Company and other electric distributors in the Tennessee Valley who get their electric power from TVA and for our customers.

The most substantial changes will be: 1) TVA’s effort to promote energy efficiency by sending “price signals” to consumers by charging more for electricity in the summer and winter and 2) TVA’s effort to shift much of the pricing risk associated with billing for energy costs from TVA to Ripley Power and Light and other local distributors.

TVA plans to charge more for electricity in the summer and winter because its costs are higher at these times. TVA’s costs to provide power vary considerably based on when customers use electricity. TVA’s new rates will more accurately reflect those differences – charging more when the demand for power increases, which, in turn, forces TVA to operate its higher-cost power plants (such as natural gas peaking units) or to purchase power on the open market (which is typically more expensive) to meet consumer demand.

Because the demand for power at peak times continues to increase, TVA must build or buy new power plants to make sure it has the electricity available when consumers need it. Investing in new plants that are needed only a few hours a day is not an efficient way to operate the power system.

However, when you flip your light switch, you expect the light to come on. That’s why we must have a dependable distribution system that can meet the demands of cold winter days when the temperature is below freezing or hot summer days when the thermometer breaks 100 degrees.

Ripley Power and Light’s largest expense is the power we buy from TVA; about 85 cents of every dollar we collect goes to pay our TVA wholesale power bill. Ripley Power and Light’s board and management work hard to keep overall expenses down, just like you do with your household budget.

It’s a big savings to ours — and our customers’ — bottom line if Ripley Power and Light can lower the amount of power it buys. That’s why it makes sense for us to encourage you to use your energy efficiently. We all will benefit with lower utility bills.

With rising fuel, construction and material costs, Ripley Power and Light and TVA are facing some expensive and complex budget issues. By implementing demand charges for electricity that vary depending on the time of the year, TVA hopes to better manage its risks. In response to TVA’s move, Ripley Power and Light has taken steps to change our rate structure so we can lessen the cost risks to our customers.

To prepare for TVA’s wholesale rate structure change, Ripley Power and Light did an extensive cost of service study and developed a rate structure that will enable us to collect the revenue needed to pay our TVA wholesale power bill and effectively operate our distribution system.

Our new rate structure is designed to accommodate time-of-use rates, though this will not initially affect residential customers. Industrial customers, however, can save energy dollars if their peak energy use times are different than Ripley Power and Light’s peak use times.

Meanwhile, our automatic meters already are capable of tracking when you, our residential customers, use electricity. Eventually, the cost for electricity could vary depending on the time of day.

We know that these changes can be challenging and confusing. Ripley Power and Light is committed to keeping your energy costs as low as possible, to keeping you informed of changes and to providing the information you need to help manage your energy costs.
— Mike Allmand, President and CEO,
Ripley Power and Light