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As the leader of your local power company, Tullahoma Utilities Authority (TUA), I want to take this opportunity to help the community better understand electric rates, how they are determined, and what factors influence the cost of electricity that powers our community. At TUA, we are committed to transparency while focusing on our mission of providing our customers with safe, reliable, and affordable services.

To simplify this discussion, I will write about residential electric rates and hold the commercial rates for a later time. Electric rates are the prices customers pay per kilowatt-hour (kWh) of electricity used. These rates are designed to cover the costs of generating, transmitting, and distributing electricity, as well as maintaining the infrastructure necessary to keep powering Tullahoma and the Tennessee Valley.

The Valley’s population is growing at a rate that is three times faster than the national average, and in 2023, gross domestic product (GDP) in the Tennessee Valley Authority (TVA) service territory grew 0.5% faster than the national average.

To address the need for more electricity, TVA is investing nearly $16 billion through FY27 to build new generation and infrastructure to enhance the reliability of existing assets. TVA is building 3,500 megawatts and has made great progress by completing 1,400 megawatts and securing 800 megawatts of solar generation this year.

To fund ongoing construction and energy development, TVA is implementing a 5.25% rate increase that will go into effect on October 1, 2024. With the average monthly residential bill in FY23 being $138, the rate increase will translate to approximately $4.35 more per month for the average residential electric customer.  

Our commitment to you

At TUA, we understand that any increase in your utility bill can be a concern. We want to reassure our customers that we remain dedicated to providing you with the highest level of service at the most affordable rates possible. TUA will not profit from this rate increase; we simply pass along the costs from TVA to our customers. 

How are electric rates determined

1.      Cost of Power Supply: The biggest portion of your electric bill is the cost of purchasing power from our supplier, the Tennessee Valley Authority (TVA). TVA’s rates are influenced by the costs of fuel, such as natural gas and coal, as well as the costs associated with operating and maintaining power plants, renewable energy sources, and other infrastructure.

2.      Infrastructure Maintenance and Upgrades: TUA invests in the maintenance and upgrading of the electric grid to ensure safe and reliable service. This includes repairing lines, maintaining transformers, and investing in technology that improves service reliability.

3.      Operational Costs: Operational costs include everything from customer service and billing to employee salaries and emergency response capabilities. These costs are essential to providing you with uninterrupted power and addressing any issues promptly.

4.      Regulatory Compliance: As a public utility, TUA must comply with state and federal regulations, which often require investments in technology and processes to ensure environmental protection, safety, and reliability. 

TUA’s time of use (TOU) rates

As the demand for electricity increases, so does the cost of producing it. Typically, hot summer afternoons and cold winter mornings are the peak demand periods, meaning that the costs to purchase power are higher during these periods. TUA purchases power from TVA on a TOU rate schedule and TUA sells power to our customers on a TOU rate schedule. If a TUA customer chooses, they can take advantage of this schedule by strategically shifting some of their energy usage. As a reminder, TUA’s TOU Rate Schedule is listed below. The off-peak rate is about $0.06 less than the on-peak rate.

•        Summer months (June, July, August, and September): Peak hours are 1 p.m. to 7 p.m.

•        Winter Months (December, January, February, and March): Peak hours are 4 a.m. to 10 a.m.

•        Other months are considered transition periods and are charged at lower rates 

Looking ahead

TUA will continue to work closely with TVA to ensure that our community benefits from a reliable and sustainable energy future. We will keep you informed about any future changes and remain transparent in how these adjustments impact your service.

We appreciate your understanding and support as we navigate these changes together. If you have any questions or concerns about your bill, please do not hesitate to reach out to our team.

Allen Potter is the president of the Tullahoma Utilities Authority.