TVA, Hooked on Dirty Energy

The mighty Tennessee Valley Authority isn't in any rush to pivot to clean energy

By Austyn Gaffney

Illustrations by Mark Smith

September 14, 2022

TVA Hooked on Dirty Energy

TENNESSEE'S WEATHER is unsettled. This summer, excessive heat warnings bore down across the Tennessee Valley like a weight. That came after a winter when an ice storm froze utility poles and wires, causing over 130,000 people to lose power. In August 2021, record flooding killed more than 20 people and prompted the governor to declare a state of emergency. That followed the deadly winter of 2020, when a dozen tornadoes—including one that ripped through downtown Nashville—caused over a billion dollars in damage. Twenty-four people died. The previous summer, in June 2019, a derecho spanning 600 miles spawned four tornadoes, uprooting trees that had stood since the Civil War and leaving residents without electricity for a week.

In October 2019, amid these storms—increasing in both frequency and intensity under climate change—Rody Blevins, then president and CEO of a local energy co­operative in East Tennessee, drove to Murfreesboro, about 45 minutes south of Nashville. Once there, he joined 30 representatives and lawyers from local power companies to plot a revolt against the mighty Tennessee Valley Authority, the nation's largest public power provider, created by a 1933 act of Congress to pull the rural Southeast out of the Great Depression.

TVA is exploring replacing coal plants with gas plants and pipelines.

Some critics of TVA see it as stuck in the past: Over three-quarters of its generation mix is coal, gas, and nuclear, and less than 5 percent of its portfolio comes from solar, wind, and efficiency programs. Others complain that the quasi-public utility is unaccountable to its ratepayers. The proximate cause of the Murfreesboro meeting, however, was TVA's July 2019 plan to bind the 10 million people served by its power, spread across seven southern states, in a never-ending union. TVA's long-term power proposal, termed "forever contracts" in one lawsuit, called for 20-year rolling contracts—annually renewed—with a 20-year notice required to end the contract. (In an email, TVA said the 20-year partnership option "helps both TVA and LPCs [local power companies] better plan for the future and offers increased flexibility to serve customers.")

While the majority of the 153 local power companies in TVA's service area went along with this till-death-do-us-part commitment, the holdout group found it unacceptable. Blevins, along with representatives from Memphis Light, Gas and Water (TVA's biggest customer, which provides a tenth of its revenue), believed cheaper and greener options were available outside TVA's transmission system. The problem was they couldn't access it.


TVA Hooked on Dirty Energy

The local power companies that make up TVA's 80,000-square-mile empire are lassoed around four poles: Bowling Green, Kentucky, to the north; Memphis, Tennessee, to the west; Carthage, Mississippi, to the south; and Asheville, North Carolina, to the east. That perimeter is what's known as the Fence, a boundary set in 1959 under the Eisenhower administration to limit the supposed threat the quasi-public company posed to private power companies. (It was the era of McCarthyism, and Congress feared "creeping socialism.") TVA was prohibited, with a few exceptions, from selling electricity outside the area it was serving as of July 1, 1957. It could also refuse to let outside power companies use TVA's transmission system to sell energy to those inside. This made the Tennessee Valley the only region in the United States exempt from the open-access transmission policies set by the Federal Energy Regulatory Commission (FERC) in 1996 to increase competition among power providers.

The result, argue Blevins and others, is that what began as a democratic power experiment morphed into a monopoly. "What they don't think they can do is get competitive," Blevins told the assembled power companies. "So if you don't want to get competitive and you're a monopoly, what you do is lock your customers in forever." In his view, TVA abandoned its original mandate of providing cheap electricity and failed to adequately focus on environmental programs in favor of netting billions in annual revenues and paying out enormous executive bonuses.

Blevins is a mild-mannered grandfather with yellow hair like hay swept across his forehead. He's been a thorn in TVA's side for years, stubbornly committed to the mission of the 1936 Rural Electrification Act: energy at the lowest cost possible to as many people as possible. Nearly half the 17 counties within his Volunteer Energy Cooperative (VEC)—which serves 100,000 people in a strip from the Kentucky line to the Georgia border—qualify as "at risk" or "distressed," traditionally meaning that they have a high number of people living in poverty. The South has nine of the 10 states with the lowest median income in the country.

"They [TVA] don't think there's anyone telling them that they need to move away from fossil fuels, and so why should they do it? They like how they're doing business now."

A year after the Murfreesboro meeting, Blevins joined three other local power companies in filing a petition with FERC, claiming that they could save up to $750 million over 10 years and lower electricity costs for their customers if they were allowed to seek electric power beyond the Fence. They also sought access to more renewable energy. Instead of abiding by the Biden administration's "whole of government" approach to reach net-zero carbon emissions in the electricity sector by 2035, TVA aims to cut just 80 percent, largely through new gas and nuclear plants. By 2035, TVA could still be generating more than 34 million tons of carbon dioxide a year. While TVA recently boasted that it would add 5,000 megawatts of carbon-free energy to its transmission system, its request for proposals noted that this "does not constitute a commitment, implied or otherwise, that TVA will take action in this matter."

"Change is hard," said Amanda Garcia, an attorney for the Southern Environmental Law Center. "They [TVA] don't think there's anyone telling them that they need to move away from fossil fuels, and so why should they do it? They like how they're doing business now."


TVA Hooked on Dirty Energy

TVA's course could be altered, of course, by its own board, which is now due for a shakeup. Six of its nine members must be appointed by President Biden and confirmed by the Senate this year. During an April hearing for three appointees, Senator Ed Markey, the Massachusetts Democrat who coauthored the Green New Deal, criticized TVA for failing to invest in renewables: "Since most of the states that are in the TVA are very sunny most of the year, it actually doesn't make any sense that they don't have a higher percentage of solar," he said. "It is almost as though it is still the 1930s, and there hasn't been any real progress in terms of the implementation of real change in those states."

TVA could be a national leader. But instead of showing the nation how to navigate away from the climate crisis, TVA has morphed into a prime example of why we're in it.

IN SPRING 1933, engineers, architects, and laborers swarmed the Tennessee Valley, establishing the infrastructure that pulled the region into the 20th century. The great Tennessee River system was dammed, forests were replanted, soils were fertilized, and energy hummed along a spiderweb of power lines with poles fresh enough to still smell of tree sap. By 1935, the VEC stretched those lines into Decatur, bringing electrification for the first time to the tiny town just east of the Tennessee River. Lights flicked on over porches, and refrigerators soon hummed in dusty cabins.

Writer James Agee, a Knoxville native, observed the dynamo impact on the region, calling it in Fortune magazine "the laboratory for a great experiment." He described the union between the state and the newly minted TVA as a marriage: "It is the valley that is newly TVA's to have and to hold, for better, for worse."

Enormous power plants cropped up across the valley as dependably as corner churches: 29 hydroelectric dams, a dozen coal plants, 17 gas and diesel oil sites, and, eventually, three nuclear plants. The generated electricity was distributed along the arms of high-voltage transmission lines, which transferred the power to substations that lowered the voltage to what porch lights and refrigerators could handle.

"No longer do men look upon poverty as inevitable, nor think that drudgery, disease, filth, famine, floods, and physical exhaustion are visitations of the devil or punishment by a deity," wrote David Lilienthal, one of TVA's first board members, in a book called TVA: Democracy on the March. Instead, he argued, a decade of engineering had swept the region into an era of increased prosperity.

But that prosperity did not continue apace, nor has it ever been evenly distributed. Around the time TVA's Fence was established, federal appropriations for TVA dwindled. By 1999, TVA was on its own, its multipronged operations financed exclusively by ratepayers. In 2005, a modernized board moved from three members to nine, with a CEO who claims the position of the nation's highest-paid federal employee.

LAST FALL, Pearl Walker, an environmental justice chair for the NAACP Memphis Branch, purchased a generator for the first time. A few months later, Memphis faced an ice storm that took out power for roughly one out of every six city residents. For five days, as trees throughout her neighborhood crashed into streets, yards, and houses, Walker got by on boiled water and generated power. Most folks couldn't even afford that option, she said.

"They gave a lot of good things to the valley, but they lost their way when it comes to rates, and they don't fulfill their mission today. And they easily could."

Walker lives in Whitehaven, a majority-Black neighborhood in Memphis that helped launch the national environmental justice movement. In 1968, more than 1,000 Black workers and their supporters marched against the poor wages and dangerous working conditions that had culminated in the deaths of two garbage collectors. The Sanitation Workers' Strike drew the attention of Martin Luther King Jr., who gave his famous "I've Been to the Mountaintop" speech in Memphis the night before he was assassinated.

More than 50 years later, low-income Memphians now face one of the nation's highest energy burdens—the disproportionate amount of household income they need to spend on energy bills. While the average Memphis household spends 6 percent of its annual income on energy, low-income households spend more than twice as much, some up to 25 percent. "We've got people in housing that is inadequately insulated, with inefficient heat," said Memphis city councilor Jeff Warren. "If you're poor and you're already paying half your money for your rent, and now another 25 or 30 percent for energy, you're having a real tough time with what's left over to pay for food, clothing, and whatever else you need for your family."

Memphis Light, Gas and Water, with almost 440,000 customers, is the largest utility under TVA's umbrella. Although an MLGW representative attended the Murfreesboro meeting, the utility did not sign on to the FERC complaint. That's perhaps because of Memphis's unique position: Since the city straddles the western edge of TVA's Fence, MLGW can more easily draw energy from other providers.

If Memphis did jump ship, TVA would lose roughly 10 percent of its annual operation revenue. In its 2020 Securities and Exchange Commission filing, TVA feared a loss of its customer base after MLGW found it could save $122 million annually across two decades by leaving TVA, increasing solar and wind generation, and reducing carbon emissions by more than half. So in 2021, MLGW issued a request for proposals for new power companies to bid on providing the almost half million Memphians with energy.

That's a move in the right direction, according to the advocacy group Southern Alliance for Clean Energy (SACE), which argued in 2020 that Memphis had the most unaffordable energy of any major metro area. After gutting its energy efficiency programs over the past decade, TVA ended its efficiency rebates altogether in 2018. Energy savings dropped from roughly 500,000 megawatt-hours in 2014 to just over 100,000 in 2020. Inefficiency means using more electricity, and Tennessee's average residential electricity use has risen to the second highest in the nation, with the state consuming 30 percent more electricity than the national average. A 2022 study by SACE shows TVA's energy conservation spending is less than 10 percent of the national average.

While local power companies set retail electricity rates (subject to approval by TVA), TVA sets wholesale rates, which Blevins argues are higher than necessary. During Blevins's tenure, he said, his energy cooperative's call center would get 15,000 to 18,000 calls per month—out of 123,000 customers—90 percent of which were from people struggling to pay their bills. "One of the things that local power companies have to deal with is cutting people off every month because they can't afford their electricity," Blevins said. "We'd send out about 20,000 notices a month to people who are behind on their bills, threatening to cut them off, and you hate doing that kind of stuff."

Like Blevins's former rural cooperative, TVA is mandated to provide low-cost electricity. But under its first three CEOs, TVA increased rates, deepening the burden on low-income customers. It began acting more like an investor-owned utility, beginning a 10-year plan in 2013 to raise rates to pay down its almost $30 billion debt, largely accumulated from unfinished nuclear plants. After paying down that debt to roughly $18 billion, TVA ended the rate hike. But Blevins argued that its net income—what private companies call a net profit—is still $1 billion above historic levels, and lowering the net income to historic levels could save customers up to 10 percent on their electric bills. But, he said, top executives like CEO Jeff Lyash and a cluster of vice presidents use the high-net income as a pay-for-performance metric that generates bigger bonuses.

Instead of lowering rates for Memphis, Lyash promised vague incentives to stay with TVA in a 2020 letter to MLGW president and CEO J.T. Young, like the possibility of new job opportunities, a new port along the Mississippi River, and the expansion of TVA's Memphis headquarters. Lyash said these offerings amounted to $2 billion in savings for Memphians over the next 20 years.

But none of these promises come with strategic plans to carry them out. The NAACP Memphis's Walker said that TVA had offered to provide money toward infrastructure upgrades that would ease the energy burden, but only in the context of a "forever contract." "A lot of people feel that's disingenuous," she said. "If you're such a good steward and you've got the damn money, why can't you just help?"

In the end, the Memphis utility received bids from 27 power providers, including TVA. Advocacy groups have asked MLGW for more transparency in the bidding process, especially regarding the proportion of bids that include renewable energy. The lack of transparency has led Memphians to question whether their local utility is secretly favoring TVA's bid. Whichever provider MLGW chooses will require approval by both the Memphis City Council and the MLGW Board of Commissioners. "It's probably the most significant decision that we're going to make as a city council for the next 50 years," said council member Warren. "We're stuck with this horse-and-buggy situation wondering, Is there a better way for us to get less expensive electricity?"

"This town bends over backward for industries," said Sarah Houston, whose organization, Protect Our Aquifer, is involved in another lawsuit against TVA, alleging that its forever contracts violate both the National Environmental Policy Act and the TVA Act. "There's an impact not only to ratepayers but on the health of folks who depend on the resource. We've really degraded the environment in Memphis, and it shows."

"The power supply matters because how people are getting their power matters to the overall health and well-being of our climate," said Justin J. Pearson, president of Memphis Community Against Pollution. "One of our big concerns about TVA is using gas pipelines as a bridge fuel to renewable energy, as if such a thing could ever exist. It'd be a pity to have a new energy supplier with the same problem of where the power is being generated."

WHILE MEMPHIS waffles over whether to stick with TVA, CEO Lyash, who joined TVA in 2019, is tying the utility into an expensive knot of methane gas and nuclear plants. Lyash spent his career in nuclear energy, most recently with Ontario Power Generation, a Canadian utility that provides a third of the province's electricity through two nuclear plants. In April, Lyash announced a partnership with Ontario Power to invest in small modular reactors, promoting them as a lower-cost and potentially safer option to generate nuclear energy. Should he get his way, these reactors will phase in as units from TVA's five remaining coal plants phase out. The first will be developed with a $200 million initial budget near Oak Ridge.

TVA currently operates the nation's newest nuclear plants, whose massive concrete cooling towers rise above the Tennessee River: Watts Bar Unit 1 came online in 1996, joined in 2016 by Watts Bar Unit 2, after 43 years of construction and $4.7 billion spent, almost twice the originally forecast price tag. Over the years, TVA's nuclear sector has been dogged by a litany of whistleblower complaints, safety issues, and ballooning spending. As recently as May, three former TVA nuclear oversight managers filed a lawsuit alleging that they were illegally fired from their posts after alerting the Nuclear Regulatory Commission about violations at TVA's three nuclear plants.

Elsewhere—both in the United States and internationally—nuclear generation has declined, while renewables like solar and wind have become the nation's second-largest electricity source. The Energy Information Administration predicted solar alone would account for 22 percent of US electricity by 2050. But not at TVA. It's retiring two coal-fired plants—Cumberland Fossil near Nashville and Kingston Fossil near Knoxville—but plans to spend $1 billion to transition them to methane gas, part of the country's second-largest gas buildout. TVA has contracted Kinder Morgan and Enbridge to build pipelines to Cumberland and Kingston, respectively. Both projects require approval from FERC, which now must consider carbon emissions before approving new pipeline construction.

"You're not seeing a lot of methane gas buildouts on this scale in other places because solar and [battery] storage have become increasingly cost-competitive," said Garcia of the Southern Environmental Law Center. "A lot of utilities are less tied to this business model."

Nashville Electric Service, TVA's second-­largest customer after Memphis, along with Nashville's mayor and metro council, came out against the transition plan for Cumberland. The NES board is trying to prioritize renewable energy and said that TVA's insistence on fossil fuels "places [Nashville] behind other major power providers." Then the EPA joined in, saying that the agency "believes it is essential for TVA to improve the proposed action . . . because of the urgency of the climate crisis," arguing that cheaper and cleaner options exist. In a late June email, TVA spokesperson Scott Fiedler said that "no decision has been made as to whether TVA would replace the retiring plant with natural gas, renewable energy, or a combination."

TVA's subsequent July announcement that the utility was looking to acquire 5,000 megawatts of carbon-free electricity generation, operational by 2029, was met with skepticism by critics like Garcia.

"It's a big, flashy PR move, but it doesn't commit TVA to anything," Garcia said. "It's an attempt to distract and confuse the public about the fact that TVA is planning the nation's largest methane gas buildout." TVA hasn't backed away from its plans to transition Cumberland to a gas plant or its agreements with pipeline companies, she noted, and is feeling a lot of scrutiny from Nashville and other local power companies, especially as power bills increased to manage high and volatile natural gas prices this summer.

TVA wrote in 2020 federal filings, "These technologies [renewables] could be more appealing to customers and could lead them to bring pressure on TVA to modify the power contracts to allow customers to generate some of their own power requirements or purchase power from other suppliers. Other customers might also cease purchasing power from TVA altogether."

Frustrated organizations across the Southeast created the Clean Up TVA coalition in spring to advocate for renewable options. The group "underscores what we think TVA could be, and the massive potential to transform the region and be a leader for the country," said Bri Knisley, an East Tennessee organizer for the local environmental group Appalachian Voices and a coalition member.

"Dirty energy is in its last days," agreed Walker of the NAACP, also a member. "We're shutting down coal plants and now trying to do gas, so we're going from one dirty energy to another. So [it's like saying], 'I'm going to get off the crack cocaine, and now I'm on heroin.' It's just as bad. It benefits TVA, and the dirty-energy industries that make the money off that energy."

THE TENNESSEE VALLEY AUTHORITY'S lack of climate ambition is, in part, a reflection of its lack of accountability. "TVA is a very unusual electric utility, with very little oversight," Garcia said. Its nine-member board meets just four times a year, leaving it dependent on TVA management for direction. While the typical private power company is overseen by a public utilities commission with an independent staff, TVA's board gets its advice from the utility itself.

Accountability could come from below, Garcia said. But because TVA is federally owned, the states in the Tennessee Valley cannot independently regulate it, and its member utilities are now bound by the forever contracts. TVA has contorted itself into a black hole of oversight, to the point where it could claim the mantle of the least-regulated US power company.

"This system of locking in gives TVA a captive customer base and therefore no real incentive to depart from business as usual in terms of their power supply," Garcia said. "TVA needs accountability and a degree of competition in order to be the best utility it can be and to be responsive to the needs of communities."

Last year, a coalition of environmental groups, including the Sierra Club, called on the Department of Energy to force TVA to become a leader in the climate emergency, "a national living laboratory to pioneer the country's renewable and just energy transition." They asked the Energy Department to release a road map on how TVA could transition to 100 percent renewables by 2030.

"A lot of us have a vision that it could be a national leader for energy and decarbonization that supports the health of communities and workers, but TVA isn't doing it," Knisley said. Instead, she noted, "TVA is taking a lot of steps to insulate current business practices, which seem more like investor-owned utility operations."

The warning flares have become so bright and chronic that Congress can no longer help noticing. In a letter in January, the House Energy and Commerce Committee said that TVA has discouraged the adoption of renewables, forcing customers to overpay for dirty energy. "Specifically, we are concerned that Tennessee Valley residents pay too much for electricity, which particularly impacts low-income households in Tennessee," the committee wrote. "The committee is also concerned that TVA is interfering with the adoption of renewable energy by its commercial and residential customers and, while it is making progress on decarbonization, it must do more this decade."

In February, the committee received TVA's responses to 16 detailed questions, which, SACE said, "includes many outdated, misleading, and incomplete claims." A day later, SACE, NAACP Memphis, Appalachian Voices, and a coalition of other environmental and justice groups called on the committee to hold an oversight hearing to investigate TVA's failures to adhere to its mandate. (Asked for comment, TVA sent Sierra its original response to the committee.)

The committee has yet to act on the request. By May, the TVA board was down to five members. The Senate held hearings on three appointees in April—two clean energy advocates and a former electric lineman turned union leader. President Biden nominated two more appointees in June: a county judge from West Kentucky and a community foundation officer from Mississippi. While one slot still waits to be filled, zero appointees have received Senate confirmation.

Meanwhile, the TVA board voted to give Lyash final say over what to do with retiring coal plants and to grant him far-reaching authority over new programs and incentives—enough to launch a new nuclear program with a potential site near Oak Ridge. And after former president Trump complained about the size of Lyash's salary—which at the time was $7.3 million, the highest salary in the federal government—the board bumped up his compensation, enabling Lyash to bring in nearly $10 million.

Pushing back, Tennessee's Democratic representative Steve Cohen introduced a bill with Republican representative Tim Burchett earlier this year to require TVA employees who make roughly $170,000 or more to disclose their salaries, bonuses, and other benefits. (TVA doesn't release the salaries of top executives other than Lyash and some vice presidents.) But the agency is becoming ever more guarded. Public participation at its quarterly board meetings was reduced to three-minute opportunities to speak. (Otherwise the meetings are closed to the public.) Then, blaming the pandemic, TVA canceled all public listening sessions for two years.

"We went two years without TVA having a public listening session," Knisley said. "We had protests about that and did what we could through TVA's public input process, like submitting a ton of comments that we're disappointed you don't have a public listening session. That happened and no one did anything."

WHILE TVA DRAGS its feet, the United States, with only 4 percent of the planet's population, consumes 17 percent of global energy and creates 15 percent of greenhouse gases. Our own public power company has failed Biden's "whole of government" approach to removing carbon emissions from the electric sector by 2035. TVA's leisurely goal of 80 percent by 2035, and an aspiration to be net-zero by 2050, is a middle finger to the president, the planet, and the 10 million customers who use TVA's dirty power every day.

In spring, Blevins retired as the president and CEO of VEC. Since his FERC complaint, Blevins said that many local power company executives he's spoken to have reconsidered their relationship, expressing regret in signing the forever contracts. But roughly a third still support TVA, which offered to cover their legal fees if they signed on to continue supporting TVA in front of FERC. TVA told them that if utilities left TVA, the lost revenue would shift to those who remained, increasing their customers' bills. Today there are only seven holdout power companies.

"I'm disappointed a federal agency puts out so much misinformation to people," Blevins said. "They basically told me [that the FERC complaint] would destroy TVA. So they scared people with those types of tactics."

He continued, "People often try to say I'm anti-TVA, which I'm not," he said. "I've worked with TVA for 40 years, and I've had a lot of friends within TVA. They gave a lot of good things to the valley, but they lost their way when it comes to rates, and they don't fulfill their mission today. And they easily could. TVA could be so much better than they are."