Memphis Could Save Around $500M a Year by Switching to Alabama-Based Power Source

October 9, 2018 10:31 AM

Memphis could save close to $500 million a year if Memphis Light, Gas and Water (MLGW) bought its electricity from an Alabama-based nuclear plant instead of the Tennessee Valley Authority (TVA).

Former COO for TVA Bill McCollum, now with Nuclear Development LLC, told a Memphis City Council committee Tuesday that MLGW currently pays TVA $1 billion a year for power, but if the utility bought its electricity from the Bellefonte Nuclear Plant in Hollywood, Alabama, “half that money could stay in Memphis.”

McCollum urged the council not to approve MLGW’s plan for rate increases, as “there is a better way to improve infrastructure and help the citizens of Memphis rather than just raising the utility rates and saddling customers with higher bills.”

A better and “viable” way, according to McCullum, is a move from TVA to Bellefonte. He said this proposal would open up funding for better infrastructure “without burdening the citizens of Memphis with higher bills.”

“It’s unusual in government for people to buy goods and services from a sole source supplier without any competitive bidding,” McCollum said. MLGW has been in a sole-source relationship with TVA for a long, long time and we think it just makes sense to look at options and competition.”

Based on a study of the feasibility of MLGW buying power from Bellefonte, the city would save $487 million a year, McCollum said. However, the savings wouldn’t incur until five years. But, McCollum said infrastructure improvements could begin immediately with financial assistance from Nuclear Development. The switch to Bellefonte would also lower the cost of power for businesses, “making Memphis more attractive," as well as for residents, “who are already having a hard time paying utility bills.”

The Bellefonte plant was owned by TVA until 2016 when Nuclear Development purchased the plant at an auction. Construction of the plant began in the 1980s, but TVA ultimately mothballed the project, leaving the plant incomplete. Now, Nuclear Development has plans in place to finish construction by 2024.

To fund the renovations and upgrades to Bellefonte, McCollum said Nuclear Development applied for an $8.6 billion loan from the Department of Energy. The two-phase application is complete excluding an updated letter of intent from MLGW, saying that the utility is still pursuing the option.

MLGW sent an original letter of interest in early February after discussion began with Nuclear Development about using the Belafonte plant. Since, McCollum said MLGW has been asked to send another non-binding letter of intent to “keep this option alive, but that the utility “has not been willing to provide us with one and stated they're interested in studying options.”

Without a second letter, McCollum said the group will not be able to secure the funds needed.

MLGW president and CEO J.T. Young said he has “a number of concerns” with the proposal and that it could present risks for the utility.

“Our signing a commitment or letter of intent puts them [TVA] on notice,” Young said. “There’s a risk associated with that because we will not know what happens in the event that this particular plant is not completed.”

McCollum’s proposal depends on a “huge presumption” that the Bellefonte plant is a viable project to complete, Young continued.

“If you look around the industry today, that is an incredibly large presumption,” Young said. “That is a very, very big risk that concerns us.”

Young said MLGW’s other concerns include the sustainability of the plant, as well as how the savings McCollum mentioned were calculated in the study. Another issue, Young said, is that the Bellefonte plant is not large enough to provide power to all of MLGW’s customers.

MLGW is conducting its own study, which will look at the utility’s infrastructure needs and energy options. The study is expected to be finished by December. Meanwhile, MLGW is keeping its options open.

“I must be comfortable with the deal that is presented,” Young said. “It is an incredibly big decision that I don’t take lightly. If I’m going to to be responsible for that decision, then I just want you to know I’m going to do my due diligence before I enter into any agreement that binds us to some unknowns.” Continue Reading

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