In deciding whether to approve the merger of Murfreesboro Electric Department, the Tennessee Valley Authority will consider many factors, including any impact on ratepayers, a top regulator said.
Jennifer Brogdon, director of regulatory assurance for TVA, spoke to the Murfreesboro Post about the sale process. Hers is the office considering the proposal by Middle Tennessee Electric Membership Corp. (MTEMC), a co-op, to buy the electric department from the City of Murfreesboro.
Jim Hopson, TVA public information officer, added a couple of comments.
TVA, which sells electricity to local power companies, also serves as a regulator of its customers, which buy electricity under a contract. Although the Murfreesboro City Council and the board of directors for the co-op approved the sale, the federal authority must give approval.
“We are very public-power minded, and we want to make sure when transactions of this type happen or are proposed, that it’s going to be in the best long-term interest of the ratepayers,” Brogdon said.
TVA will consider what is in the best interest of ratepayers, she said. That includes the cost of the transaction, benefits in excess of that cost, the financial health of both power companies before and after the sale, cost-savings, any potential rate impact and impact on reliability. An example of benefits in excess of cost would be looking at the merger’s impact years down the road and whether there were expenses like integrating the power systems’ communications systems. Benefits also could include synergies of a merged system.
Other questions with their answers are below.
Q: How common is it for a local power company to be sold?
Brogdon: It is not common but “not frequent.” There have been other sales in the TVA area.
Q: Is there any update on whether a referendum will be required for the sale to be approved?
(Brogdon sent a letter to Murfreesboro Mayor Shane McFarland on Oct. 31 asking that he obtain an opinion on the matter from the Tennessee attorney general. MTEMC said they asked Senate Majority Leader Jack Johnson to make the request to the attorney general because only certain officials like legislators may make requests to the AG.)
Brogdon: TVA is waiting on a response. There has not been a response, to their knowledge, since MTEMC made the request.
Q: Can you talk about the Municipal Electric Plant Act of 1935, the section of state law that is at the heart of the referendum question?
Brogdon: She said she is an engineer, not an attorney. TVA’s legal team is examining the question to make sure any decision meets state law.
Q: Can you talk about ratepayer assets such as the MED headquarters building? Are there regulations on how ratepayer funds are handled when a municipal power company are sold?
Brogdon: There are guidelines for use of revenues. The merger review process will look at the “holistic” transaction including purchase price, integration costs and any other costs, plus any other benefits. Consent will be driven by a “net material benefit standard that will really point us as to whether or not the transaction will be in the long-term best interest of the ratepayers.”
Q: Would it be considered a benefit if one of the utilities had features like solar power generation or advanced technology that the other does not have?
Q: The two utilities have not signed long-term power contract with TVA. Is that a factor in your consideration?
Brogdon: No. The regulatory review is independent of the long-term power contract.
Hopson added this statement: The long-term contract is an optional arrangement and is not a factor in the review.
Q: Can you talk about the two utilities’ rates and how those will integrate for residential customers?
Brogdon: TVA will look at projected rates for the two companies over time and ensure they are in a better-off condition as a result of the sale.
Q: What is the timeline to reach a decision?
Brogdon: “It is too soon to say.”
Hopson: “Our primary goal is to allow our local power companies to have local control of decisions they believe is in the best interests of the citizens they serve.” TVA’s role as regulator is to ensure the sale would have a “direct, positive benefit for everyone who is affected” in the long-term.