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article imageElectricy rate climbs 20 per cent in Tennessee

By Carolyn Neblett     Aug 21, 2008 in Lifestyle
On Wednesday, the Tennessee Valley Authority approved a 20 per cent jump in wholesale electricity rates. This increase could result in job cuts, higher food costs and an increase in the struggle for families to pay their bills.
The rate hike, which will take effect Oct. 1, is a result of run-ups in coal and natural gas prices the TVA must pay. Also causing the increase is a continuing lack of rain that has drained the power producer’s ability to squeeze the usual amount of low-cost electricity from dams along the Tennessee River system.
Seventeen percent of the upcoming increase is a quarterly adjustment to cover higher fuel costs, while the other 3 per cent is an increase to the base rate that TVA charges its distributors.
For average residential consumers using 1300 kilowatt hours of power, this could mean a $15 to $20 increase a month.
Large industrial customers could suffer an even harder blow.
According to John Van Mol, staff director of Tennessee Valley Industrial Committee, “The increase for industrial customers is actually going to be much larger than 20 percent.”
Van Mol estimated a 30 percent to 40 percent rise in rates because of the different structure and contracts the industries have with the TVA.
As a result of the rate change, TVA would take in about $2 billion more in the upcoming year, but less than a half percent would stay with the agency said TVA president and CEO Tom Kilgore.
The money will mostly go to fuel costs to generate electricity and to purchase power from other sources when the TVA comes up short.
About 60 percent of TVA’s electricity comes from burning coal, and coal prices have increased 128 percent since January, partly because of China’s increasing use of coal.
Natural gas prices are up 58 percent for the year.
The 2009 operating and capital budgets totaled more than $14.2 billion, up from $11.6 billion last year.
The $2 billion capital portion of the budget includes $232 million in clean-air projects to reduce emissions at several coal-burning plants and over $1 billion to expand generating capacity.
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