Most of the power companies that are customers of the Tennessee Valley Authority have signed long-term contracts with the federally-owned corporation in exchange for cheaper electricity. These agreements are now at the center of a lawsuit brought by environmental groups.
The suit—filed by the Southern Environmental Law Center on behalf of several organizations, including Memphis’ Protect our Aquifer—contends that the 20-year rolling contracts don’t give local utilities a fair chance to renegotiate or end the arrangement.
Of the 153 power companies in the TVA network, 141 have signed on to these contracts, which the lawsuit calls “never-ending” because they renew automatically every year and require a 20-year termination notice with penalties for canceling early.
The law center’s Amanda Garcia says TVA, under the 1933 Tennessee Valley Authority Act, legally has to limit contracts to two decades.
“Only if a distributor signed up and immediately gave notice would the contract last [only] 20 years,” she says. “That’s obviously not going to happen because of these punitive provisions, and the contracts re-up every year, so every year you would have to give that 20 years notice.”
The lawsuit also alleges TVA neglected to consider the environmental implications of the long-term agreements as it is required to do under federal law. Garcia says the contracts will affect the power supply marketplace in the region and could lead to greater reliance on more polluting sources of electricity such as coal and natural gas instead of cleaner ones such as solar and wind.
TVA spokesperson Michael Bielskis said in a statement that the long-term agreements are “completely voluntary,” ensure cheaper wholesale rates for utilities and allow the utilities to generate some of their own power, “primarily through renewable energy sources.”
“Prior to the current long-term partnership agreements, several local power companies already had 20-year agreements with TVA, and all had rolling terms,” Bielskis said.
As of Tuesday afternoon, TVA had not been served with the lawsuit so it declined to comment further on specific allegations.
The legal challenge comes as Memphis Light Gas and Water considers whether to find another power provider or sign its own long-term agreement with TVA. On Wednesday,MLGW leadership made a recommendation that the city seek bids from other power suppliers in order to better weigh its options.
Onerecent report shows that alternative sourcescould potentially save the utility more than $100 million annually. TVAdisputes thatfinding.
This post has been updated to reflect Wednesday's announcement that MLGW leadership wants to seek bids from other power suppliers.
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