- (female announcer) Production funding for Behind the Headlines is made possible in part by the WKNO Production Fund, the WKNO Endowment Fund and by viewers like you, thank you.

- The question of who will provide electricity to Memphis, tonight on Behind the Headlines.

[intense orchestral music] I'm Eric Barnes with The Daily Memphian.

Thanks for joining us.

I am joined tonight by John Bear.

He is the CEO of the Midcontinent Independent System Operator, also known as MISO.

Thanks for being here.

- Thank you.

It's great to be here.

- Here along with Bill Dries, reporter with The Daily Memphian.

MISO is obviously a big... Is been in the news quite a bit lately.

I may actually kinda turn to Bill to make sure we frame this up correctly for people who haven't followed it as closely as certainly you have, and that we have with the big decision that MLGW has of whether to renew its long-term relationship with Tennessee Valley Authority as the provider of electricity.

There's an RFP process.

There are consultants.

One of the main alternatives that has come forward is MISO.

And Bill, why don't we start with maybe just a quick where we are in the RFP process.

This is ultimately a decision of MLGW, its board, but because MLGW is owned by the City of Memphis in practice, it seems that the decision may well finally come down to the Memphis City Council.

- Right.

On August 16th, JT Young, who is the CEO and President of Memphis Light, Gas and Water division, who you've seen before on this show will make his recommendation to the Light, Gas and Water Board about options going forward.

In essence, the basic question here with a lot of complex questions after it is, should Memphis Light, Gas & Water continue to have the Tennessee Valley Authority as its provider of electric power.

So he'll make that recommendation on the 16th.

The Light, Gas and Water Board will probably take its vote on this by the end of the year, after some public hearings, probably a lot of public hearings between that August 16th recommendation and the decision that the board makes.

So that's where we are.

- And it will get into some of the real complexities of there is a bid for transmission, there's a bid for generation, there's a lot.

But let's go kind of big picture, John, if we can, and then we'll get, more and more of the details over the course of this conversation.

And again, thank you for being here and from Indiana, make your case.

I mean, why would MISO be a great alternative, a good alternative for the City of Memphis?

- MISO is a very experienced grid operator.

We've got a proven track record of creating value for our members.

We've created $40 billion of value for our members over the last 15 years.

We can provide them access to multiple options for energy providers, as opposed to just one.

We can provide them access to 40 gigawatts and growing of renewable energy.

So we think that MISO gives them a tremendous amount of options to get what's best for the folks here in Memphis.

- You mentioned a couple things, members.

That's the new thing I think for our terminology in terms of considering as a city, as a community, 'cause of course Memphis Light, Gas and Water provides electricity, not just in the City of Memphis.

What do you mean by member?

- Well, if you think about MISO, it's got a member just like the City of Memphis.

And in aggregate, if you look at our membership, it's almost 200 gigawatts.

So we've got a very large, very diverse footprint with which to provide them energy and a lot of people, or a lot of companies I should say, that are very anxious to help serve them.

- Right now and I think more people know this now, but the what is the Allen Plant?

The power plant that is down on President's Island.

It was rebuilt in the last 5 to 10 years.

The old Allen Plant people talk about, which is a coal fire plant.

Those are actually not MLGW assets, is this right, Bill?

- The old, not to get to into the weeds on this-- - Oh, let's do this.

- But the Allen Plant was originally built by Memphis Light, Gas and Water, but it's been owned by TVA, the new $1 billion natural gas fired Allen Plant, which is just across the road from the old one was built by TVA, opened in 2018.

- So when MLGW proper itself doesn't generate any electricity.

So for Memphis, MLGW to leave TVA and join MISO, and become a member, it sounds like, cause the proper terminology, what would Memphis then have to begin to generate power?

- They wouldn't have to generate power.

They could buy power that they need from MISO, the long-term contracts and short-term contracts.

They'd have multiple options to build out what their portfolio needs might be.

- And then the other one then I'll go to Bill, is people talk a lot about the cost of transmission and just the challenge.

Do power lines have to be run across the Mississippi?

Does Memphis have to pay for those or is there another provider, do you all build and own that those transmission lines to get electricity to the Memphis area?

- Well, the City of Memphis would have someone build the transmission lines for them.

I assume they would own them.

And we estimate the cost of that at a very high end to be $400 million.

And we've got a pretty conservative estimate of about $100 million a year in benefits.

So a four-year payback.

- All in all, if power came over, build your own transmission lines and then, and sign up with MISO.

- Correct.

- At least 100 million a year.

- Correct.

- Okay, Bill.

- John, talk about the consortium approach that MISO has because the members include such familiar names as Entergy Mississippi, Entergy Arkansas, which are seen as probably the most likely providers out of MISO if that winds up be being the decision here.

So it's a little bit different than TVA, which does generate power at plants that it owns, right?

- Well, it's really no different.

We've got members that generate power at plants that they own, and they could provide energy with excess capacity that they have to the City of Memphis.

And Entergy's a great example of somebody who looked at MISO, tried to decide whether or not to join.

They did join.

They had some estimates on what their savings would be, and they've achieved documented savings at 1.4 billion over the last five years, which is twice what they estimated on the entry to MISO.

So the benefits are there.

It's real.

- One of the things that has come out of the request for a proposal process here, and even before that is that is that Light, Gas and Water has really kind of moved to the position that if we change from TVA, no matter who we go with, we probably do want to generate some of our own power locally or contract to have someone do that here for us locally, if Light, Gas and Water does that, would it in turn be able to sell excess energy within MISO?

- Absolutely, they would.

They'd be able to sell it again under long-term contract, under short-term contract, on a daily basis, hourly basis, however they chose to do it.

- All right.

One of the twenty-four or so companies that submitted proposals as part of this RFP process was a group headed by Franklin Haney, a Chattanooga developer who wants to bring the Bellefonte plant in Alabama online and generate power.

And he's one of the people.

And in his presentation, there was some link to MISO in there.

And as I understand it, MISO is not a part of that particular proposal, right.

- That's correct.

- Okay.

Is MISO working with any of the other people who made proposals.

- So not that I'm aware of, again, what we would do is help facilitate things once the City of Memphis made their choice, so they could get access to that power where they needed transmission to move it or whatever they needed, but we're not a part of anyone's proposal.

No.

- Okay.

In terms of just recent events, I think I was reading before I came over here that MISO's board has approved at $10.2 billion infrastructure, let's say, for some of the Northern states in the system.

I take it that applies to those Northern states and does not cover this part of MISO's network.

- That's correct.

We bifurcated our system because we have some work to do to configure the system down South to where we can easily move the energy around where it needs to go.

That will happen next in our process.

But right now we're just focusing on sort of the Midwestern part of MISO.

- Are there problems with stability or avoiding brownouts that are behind that or is this just part of a modernization.

- It's part of a modernization and resilience package to help us support our membership in that part of the MISO footprint to achieve these strategic goals that they have.

A lot of renewables coming online.

We're probably gonna see 30, 40 gigawatts of renewables come online in the next five to seven years.

- Let me make a note about Franklin Haney and the nuclear plant down in Alabama, and we wrote about him extensively at Daily Memphian, and some of the whole backstory of that.

One of the criticisms, or we may fairly framed more as a concern that people have raised is, well, Texas has a big, sort of system of a diverse system.

That's more of a network, not a single provider.

They had the utter disaster this last winter during their ice storms and brownout and total blackouts and equipment had not been kept up, people have read about and heard about that.

How do we know that MISO isn't us signing up with the same sort of distributed, not controlled environment that is developed in Texas?

- Sure.

So MISO is very different than Texas because we're interconnected to the Eastern interconnect and a lot of big markets and non-market across that.

- What is interconnect?

- So think about the Eastern part of United States.

So we have markets on either side of us that have a combined 300 gigawatts of electricity capability.

So our interties really give us a whole lot better way to manage our risk when that severe weather comes.

- So those are connections to power suppliers outside MISO property.

- Correct.

- And you talk about gigawatts.

I think I know, but I really don't.

When you look at Memphis, Memphis has, do you look at it and say Memphis has a daily, weekly or annual demand in terms of gigawatts?

- So we'd look at it seasonally.

And we try to figure out what their peak day, peak hour was within those four seasons.

- Which for Memphis ranges from roughly what to roughly what?

Just for perspective, for the average listener.

- I believe it's roughly five gigawatts.

- So do you have other cities in MISO of a comparable size to Memphis that to some degree parallel in terms of the demand and maybe even that they have a city-owned utility that may not be possible, but I'm just curious because your network is so big.

There's a lot of rural areas.

There are some big cities, but is there comparable situation?

- I don't think it matters because we've got a lot of comparable size utilities in MISO, Indianapolis Power and Light, or IAES, Indiana's one where I live that serves a comparable amount of load.

And we've got a whole lot of different sizes of utilities and we treat them all the same.

The nice thing about being in MISO is it does put them on equal footing with all the other members.

- Is there currently enough excess capacity and correct me if I'm not framing this right.

But what I would think of is, is there enough excess capacity in MISO system now to take on Memphis immediately, it can't be done immediately.

Or is it a matter of you we sign up, Memphis signs up and the transition plan, which would be years, you have to build up the capacity to take Memphis on.

- So I think the answer is yes, to both.

There is enough excess capacity in our Southern region to accommodate Memphis.

And I think there's also gonna be some capacity built to help accommodate them as well.

So I think it'll be a mix for them.

- Then you would build capacity on at your expense, or is that back to expecting Memphis to build capacity?

- Well, it depends either Memphis would build some of it or they would contract with other parties to build it for them.

- And you would or would not be a potential contractor for Memphis to build?

Let's say, Memphis said we wanna build a power plant and we don't care about Allen.

We wanna build a new gas...

I'm making this up, a new gas power plant.

Would you be a part of that, or that would be totally on Memphis to get done?

- That would totally be on Memphis to get done.

But we would be there to facilitate it, helping them understand transmission interconnections, how the plants might operate, what their needs would be.

Those kind of things.

- Bill, we got we're about halfway through the show about 15 minutes.

- All right.

And who does Memphis Light, Gas and Water negotiate with for the wholesale rights of the electric power.

- Whoever they choose through a request for proposals to provide them energy.

And have choices.

They could do a long-term contract with someone, a third party.

They could buy some from the energy market based on what the price might be if they liked it, or they could mix the two together.

- MISO has sometimes been referred to as a marketplace.

Is that accurate?

- I think that is accurate.

I think we do a couple different things.

We do actually operate the physical transmission system.

And moving electrons where they need to go, but we also provide an energy market that folks can buy and sell into.

- And that is something of a switch from TVA where some long term rates have been locked in, is that possible within MISO's network?

- So it is possible.

So what you would do again is say, I'd like to lock in some percentage of my need and you would go to a third party or third parties and have them bid on that.

And then you could pick the lowest bid and lock that in.

- How many utilities are going through this process?

Are we an outlier on this?

Or is this a trend in the industry for utilities to be looking at other options?

- So I think it is a trend in the industry.

I think what people are finding is that as they take on renewable energy and the intermittency that goes with it, it's very challenging to meet those needs if you don't have a big scope and scale footprint with diversity in it to help manage that.

And we're even hearing from some of the other TVA members as well, that are interested in seeing what goes on at MISO and how that works and getting a lot of questions from them.

- One of the terms that we've also become familiar with over the course of the last few years is balancing authority.

What is a balancing authority, does MISO serve that role?

- So this is back to the question you just asked.

If a city like Memphis were to be its own balancing authority, it's expensive and it's difficult.

If you join MISO, we are the balancing authority for you.

So that you can sort of hand that off to somebody else.

And we're so much bigger, we can manage it much better.

- And the balancing authority basically aligns the different sources of energy.

Is that?

- Like a balancing authority to the layperson is what?

- So we manage your transmission system and we manage the flows on that transmission system.

So think about someone managing traffic on a toll way, to make sure that the traffic is moved around in the right places at the right time so you don't have congestion and things like that.

- I think that is the part.

And again, I'm not accusing you of this.

I just, I've heard people say this.

That's the part that gets people thinking, well, that's like Texas and they didn't have enough power and everybody needed power.

And how do you make that decision in an extreme event that Memphis is gonna get its power and everybody's gonna get their power?

I mean, or it is, is there a point at which choices have to be made about who gets power?

- Sure.

So let's differentiate Texas from MISO one more time.

So Texas is a single-state entity.

They are not intertied into the rest of the country, right?

MISO is a 15-state and 1 Canadian province entity, tremendous diversity all the way from Manitoba down to the Gulf of Mexico.

We are interconnected into a lot of big markets next to us, which I talked about earlier.

And all of that gives us tremendous different risk profile, as opposed to what just the state of Texas has.

- You mentioned green energy.

Talk about that.

And apologies if you already said this, but the percentage, I mean, that's an increasing number of people in Memphis talking about that, talking about, can we have more, can we get solar, can we get some other alternative sources?

The move from the coal-powered plant to the gas-powered plant.

I don't know how you measure this, but I'll ask it in my way of all the gigawatts of power that MISO has and provides, what percentage is from green sources?

- We're getting close to 20% in terms of what's there and it's growing tremendously.

And one of the things that MISO does have access to is some of the greatest wind areas in the country.

So when you think about western Iowa, western Minnesota, Indiana, I mean, some of those areas are incredibly productive in terms of wind investment and they can have access to that through us.

- And that 20% is broken down to wind, solar-- - It's predominantly wind.

There's quite a bit of hydro as well.

Especially with Manitoba bringing it down.

But we're seeing a tremendous amount of solar, gonna be interconnected probably in the next five years.

- And that, people talk about solar and the cost has just cratered in a good way in terms of building solar panels for your house or for at scale.

I mean, you said in five years, you'd be doing quite a bit of additional solar that would get you to give or take what percent, or perhaps?

- Fity percent maybe, forty, fifty percent in terms of what could be there from a renewable standpoint.

- Fity percent of whatever that renewable part is, and then wind also getting more efficient or is that peaked in terms of efficiency?

- It's very efficient but it's gonna continue to get a lot of investment.

- Bill.

- All right.

So the RFP process is complete here.

The Light, Gas and Water board begins to make its own decisions.

I think MISO, or at least the energy folks from Mississippi and Arkansas were already on the ground here kind of saying, this is what you could expect in the event that you go further down the road on this route.

From what you've seen of the process, how normal is it for this kind of review to take place?

- Again, I think it's very similar to the process Entergy went through in terms of how it happens.

The only difference I would say is, how you include independent parties to evaluate things, like your cost of transmission.

MISO's are overseeing the build of $25 billion of transmission over the last 15 years.

And we can't get close to where their estimates are.

So some of that needs to be worked out.

We do think the benefits are there for sure, at $100 million and we think that's conservative.

- So there's more discussion to come on the whole idea of what the cost of this is and what the benefit of this is, or the savings are compared to where a TVA is now.

- I believe so.

I do.

And I think there's even more benefit that's not being counted.

Things like having access to multiple providers over multiple terms would provide you a much better alternative than just one.

- All right.

Just to clear something up on the transmission system, when you talk about Light, Gas and Water, or someone that contracts with doing the transmission is that once it arrives in the city or before it gets to the city?

- Can you ask your question again?

- So between the city and let's say the Entergy plant in Little Rock, who pays for that?

- So once they build their transmission system, it would be pushed into MISO, right?

MISO has a network transmission rate, which is everyone's transmission costs added up divided by how many people are on the system.

So it averages things out and they will just pay a system rate.

- So we link up to that system?

- Correct.

- So that would mean, [chuckles] again, it's amazing, the misunderstandings and questions people have.

So I appreciate you walking through this way.

That would mean that potentially Memphis would own these lines across the river.

There'd be a point at which it plugs into what the existing system.

- Correct.

- That is what, that we don't own that, we're paying a fee, the fee you just described for that section.

- Correct.

And you'd be paid a fee for your transmission.

So it's just a network service.

Think of it as anytime you got on a tollway, you paid the same rate.

- And apologies if we already said this Bill, but when the RFP, the MLGW gave kind of a preview of some of the results of the RFP, they didn't name companies, but MISO came forward and said, that was our stuff.

And other people came forward and said, you know who they were within the odd, anonymous-- - Not all of them, but some.

- Some came forward, a little odd, but it is what it is.

JT Young and, I think, Mitch Graves, the head of the MLGW board said, look from what we see and based on the recommendations of our consultant and their analysis, the savings are very, very small, well, under $100 million.

Was that correct?

- I think in one upper level estimate it hit 100 million.

- And I know you've said this, but I'm gonna walk through it again, because that's what people get really concerned about, is saving the money.

Those who wanna leave, say, we're paying, we can save 400, four hundred and fifty million.

The savings you estimate when you talk about the conservative estimate of $100 million a year, that comes primarily from paying a lower rate for electricity?

I mean, is it that simple or is there a lot more to it?

- That's predominantly where the savings are.

And again, I would go back to Entergy and show you, the demonstrated savings that they've got and they've published, you can see them, they estimated 700 million, they got 1.4.

- The critics at TVA, the point, they have lots of reasons, they're critical.

One they point to, well, TVA has incredible amount of overhead, has very high paid salaries of executives and so on.

Do you all, I mean, we're not gonna break down your balance sheet and your P&L right here, but what is the difference that makes you all able to provide that electricity?

Is it a matter of overhead, is a matter of your margins are not as high as TVAS, what is it?

- It's a matter of scale.

It's just the fact that we've got so much more capacity inside of our region.

And we've got a lot of weather diversity, which allows us excess to move where we need to move it, and then we can move it very cheaply.

MISO is a 501(c)(4) corporation for the public good.

Everything we do is in the open, transparent, our board meetings are in the open.

You can come and sit in them, we've had them here.

So there's nothing behind closed doors and everything is documented.

- The other thing, just a couple minutes left here, that TVA does that even the critics of TVA will say, well, TVA provides a lot of tax incentives and other incentives to business and economic development incentives to get companies to move here, to stay here.

Is MISO in that game or that business?

- We're not, we return all of our funds back to our members.

And my question for those benefits and those economic development funds is where do they come from?

Because they they've gotta come from somewhere, right?

And again, when we stand back and look at TVA, we see their size, they're roughly the same size as Entergy.

So maybe what they should think about is joining MISO because they could save $300 million a year or so.

- So how is that money returned back to members?

- So we calculate rates.

And at the end of the year, if we have excess funds that we've over collected, which generally it's very small, of course, then we reduce the rates for the next year.

- The just a minute left.

The other criticism, for some people goes back many, many years.

In fact, decades, criticism of TVA is that they have a very big presence in Chattanooga.

They have a presence or is it in-- - Knoxville.

- In Knoxville.

Thank you.

But very little presence in Memphis until it became clear that Memphis was considering leaving TVA.

Would you all have a corporate presence here in any way?

It doesn't sound like it based on the model you all have.

- We most likely wouldn't have a bricks and mortar place here, but we do have customer service folks who spend a lot of time with our members, helping them and helping understand what their needs and requirements are.

- What is the biggest misunderstanding you hear in this process through the RFP, through talking to people, having your board meeting here, media like us asking you a question.

What are the most common themes of misunderstanding that you hear?

- I think people have a hard time believing the benefits that we can create.

And I think when you look at them and I can show you documented cases, and Entergy is a great one, you can see in each of their jurisdictions where they've made public filings and documenting the savings that they're getting.

So the benefits are real and our members are voluntary.

So if they weren't getting benefits, they wouldn't stay in MISO.

- And the commitment, I mean, TVA is looking for, I think a 20-year extension.

What sort of time framing is the commitment to MISO?

- I believe it's a three to five year commitment.

- And could be done in how quickly or how slowly?

Memphis could move to MISO how quickly or how slowly?

- I think it's a function of how quickly they could get the transmission built that they need.

- Any sense of how long?

- I wanna say it's five to six years.

- Five to six years.

- And at any event, MLGW would have to give a five year notice to TVA.

- And speaking of TVA, we had Jeff Lyash, the CEO of TVA on the show recently in the last two months or so.

And you can get that at wkno.org or on YouTube, or you can go to The Daily Memphian site.

John Bear from MISO.

So thanks very much.

I appreciate this.

This was very helpful and very informative.

Bill, thank you.

And thanks for all the context that I lacked.

You can get the full episodes as I mentioned, always at wkno.org, you can also download the podcast version of the show from The Daily Memphian site, from the WKNO site, iTunes, Spotify, or wherever you get your podcasts.

Thanks very much.

And we will see you next week.

[intense orchestral music] [acoustic guitar chords]