CORRECTIONS: This story was updated at 11:02 a.m. on Wednesday, Oct. 6, 2021, to state that the plan mentioned in the third paragraph would impose a $40 per megawatt hour penalty on any utility that does not boost its share of carbon-free energy by 4% a year, not cut its carbon emissions by at least 4% a year. The 13th paragraph was also corrected to state that a study by the Southern Alliance for Clean Energy found that Duke Energy Carolinas and Duke Energy Progress - not NextEra of Southern - have achieved 60% reductions in carbon emissions. An earlier version incorrectly stated the projected $3.5 trillion cost of the proposed infrastructure spending package.
The municipalities and power cooperatives that deliver electricity in the Tennessee Valley are objecting to part of the massive infrastructure plan Democrats have proposed because they say the plan could penalize them if the Tennessee Valley Authority doesn't do enough to decarbonize its energy production.
In a letter to Congressional leaders, a coalition of TVA distributors is asking Congress to amend the proposed Clean Energy Performance Program to alter the potential penalties facing cities and power coops that rely upon TVA for nearly all of their power if the federal utility doesn't meet the new standards to cut its carbon emissions.
Doug Peters, the president of the Chattanooga-based Tennessee Valley Public Power Association (TVPPA) that represents the 153 municipalities and coops that distribute TVA power, said TVA distributors "will be at a significant disadvantage" under the proposal drafted by the House Energy and Commerce Committee. That plan would impose a $40 per megawatt hour penalty on any utility that does not boost its share of carbon-free energy by 4% a year.
"We don't think that is fair because we don't have any ability to control any improvements or lack thereof and our members don't have any way to pay these penalties except with money charged to our customers," Peters said in an interview Tuesday.
Municipal utilities like EPB and power cooperatives like Volunteer Energy "are not opposed to congressional action to unlock resources needed to manage a transition to a cleaner grid," Peters said. The proposal would provide incentives to utilities of $150 per megawatt hour of new generation from carbon-free sources such as solar, wind or even energy conservation measures.
But most of TVA's distributors have signed 20-year power purchase agreements to buy 95% or more of their wholesale power from TVA, which they cannot directly control. The distributors will be assessed any penalties for not meeting the carbon reduction targets in the new infrastructure plan, potentially forcing power rate increases since the publicly owned utilities have no shareholders to absorb such penalties, Peters said.
Environmental groups pushing for more carbon reduction by utilities to help limit greenhouse gas emissions linked to global warming insist that utilities can decarbonize the power grid and, using the proposed $150 billion of incentives, keep rates relatively stable and power delivery reliable.
"Utilities have a huge opportunity to retire old and expensive coal plants and replace that power with cleaner and often even cheaper power sources," said Maggie Shober, director of utility reform for the Southern Alliance for Clean Energy. "There are plenty of opportunities to promote more energy efficiency and to develop more solar and other renewable sources at competitive rates. And given the threat of climate change, it's essential to we do so as quickly as possible."
President Biden wants America's electricity industry to be carbon free by 2035, but the Southern Alliance for Clean Energy has called upon TVA as a federal corporation to decarbonize all of its electricity generation by 2030.
TVA says it has already cut its carbon emissions by 63% since 2005 and its integrated resource plan calls for the federal utility to achieve at least a 70% reduction in carbon by 2030 and an 80% reduction by 2035 while keeping electric rates stable. TVA has set a long-range goal of being carbon free by 2050.
Peters said other utilities that have not done as much as TVA may now be able to capitalize on the initial low-lying fruit to meet their carbon reduction standards in the legislation, Peters said.
"Those utilities that haven't done as much as what TVA has done in the past 10 to 15 years are now going to be able to pick fruit a little lower on the tree," Peters said. "TVA is going to have to go much higher on the tree and that could be more expensive."
But a study by the Southern Alliance for Clean Energy found that Duke Energy Carolinas and Duke Energy Progress have achieved similar 60% reductions in carbon emissions from their peak levels a decade and a half ago and most of the Southern utilities are more committed to growing solar power than is TVA. Shober said carbon reduction will be aided by tax incentives and energy assistance programs for consumers and businesses to make energy improvements and get more of their own solar power.
The Clean Energy Performance Program was developed as a modified version of a clean energy standard to conform with the rules of a budget reconciliation bill, which requires that policy must be related to taxes, spending or debt. As a budget bill, the measure may be adopted with a simple majority of the U.S. Senate, which is evenly divided 50-50 between Republicans and Democrats.
Republicans in the U.S. Senate remain united against the latest infrastructure plan, claiming it is too costly, imposes burdensome regulations and threatens to weaken the U.S. economy.
"This plan to spend tens of trillions of dollars fundamentally threatens the American system and the American Dream, not only by jeopardizing our fiscal stability, but by ushering in big-government socialism, which, if history is any guide, tends to crowd out everything else, including, and perhaps especially, opportunity," U.S. Sen. Bill Hagerty, R-Tenn., said in a speech on the Senate floor Tuesday.
TVPPA is appealing to U.S. Sen. Joe Manchin, a West Virginia Democrat and chair of the Senate Energy Committee, to modify the House version of the infrastructure plan. Manchin is urging a smaller spending package than the original $3.5 trillion infrastructure package proposed by President Biden.