Mississippi is unique to the rest of the U.S. in that electricity is provided by two of the largest investor-owned utilities Mississippi Power and Entergy Mississippi) along with cooperatives and municipal utilities. The creation of cooperatives dates back to the Rural Electrification Administration (REA) in 1935 in order to bring electricity to rural areas of Mississippi. There are currently 25 cooperatives in the state, with 11 under the control of Cooperative Energy and 14 under the control of the Tennessee Valley Authority (TVA).
Cooperative Energy, which is owned by their member cooperatives, is irrefutably the best run electric utility provider in Mississippi. Under the leadership of Jim Compton (recently retired CEO), Nathan Brown (Chief Operating Officer) and their management team, Cooperative Energy has continuously upgraded their generation and transmission assets. Furthermore, in 2015, they withdrew from partial ownership of the Kemper debacle before the eventual outcome would have devastated their 11 members.
TVA, on the other hand, is a U.S. government corporation that was created by the Tennessee Valley Authority Act of 1933 (“TVA Act”) to primarily generate and transmit electricity to cooperatives and municipalities in parts of seven southeastern states, including most of northeast Mississippi. While TVA performs a service similar to Cooperative Energy, none of the 14 Mississippi cooperatives actually own any part of TVA. These Mississippi cooperatives, which serve 350,000 households and 86,000 businesses, are at the risk of absorbing the cost of poor TVA management decisions that are made without any independent regulatory oversight.
TVA also has a nine-member board of directors that are appointed by the president of the United States and confirmed by the Senate, which results in making TVA “self-regulated.” Unfortunately, none of the current board members, while very knowledgeable in their own respective businesses, have any direct experience in the electric utility industry. This is evident in the board meetings, where the board members read from a prepared “script” that typically results in nothing more than a rubber stamping of TVA management decisions.
The TVA cooperatives in Mississippi and other states are collectively represented by an entity called Tennessee Valley Public Power Association (TVPPA). In the August 2018 board meeting of TVA, TVPPA’s president and CEO stated “TVA is taking the necessary steps to ensure its future, but in doing so is transferring more of the competitive risk to TVPPA members. This transferal of risk cannot be appropriately dealt with by TVPPA members under the 80-year old business model that exists today.” Since that meeting, TVA’s response to these concerns is to simply have the cooperatives sign 20-year “partnership agreements” that effectively make them “indentured servants” to TVA’s massive debt of approximately $23 billion (which is capped by federal law at $30 billion). They are also responsible for paying for TVA’s deferred pension costs, non-nuclear decommissioning costs, and unrealized losses on commodity derivatives, which collectively add up to another nearly $8 billion.
Additionally troublesome is that TVA has one of the oldest generation fleets in the U.S., with 42 percent of their nuclear plant capacity at close to 50 years old and 60 percent of their coal plant capacity over 60 years old. The multi-billions of dollars in replacement costs of these plants plus the enormous debt obligations all fall upon the ratepayers of the cooperatives that are lashed to TVA via these 20-year contracts. Given the current constraints of TVA’s 80+ year old business model via the TVA Act, it is imperative that the TVA board members at least be appointees that actually know something about the management and oversight of the electric utility industry. The economic future of northeast Mississippi depends on it.
Chip Estes has worked in energy for 38 years in management and executive positions. He now manages an energy consulting firm and several real estate entities.