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- The intensifying debate over the future of TVA in Memphis tonight on Behind the Headlines.

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

Thanks for joining us.

We are joined tonight by the two co-founders of the group, 450 Million For Memphis, a group that's been at the heart of the conversation about where MLGW can and should go now that the contract with TVA is up.

Karl Schledwitz, thanks for being here.

- Good to be here.

- And Jim Gilliland Jr.

Thank you for being here.

- Thank you.

- Along with Bill Dries, reporter with The Daily Memphian.

Bill, why don't we just do, for people not as close to this debate and this issue as we all are and certainly these two are, MLGW's agreement with TVA, as I mentioned, is up.

That's for the providing of electricity to Memphis.

Some people still, I think, even though this debate's been going on and this conversation's been going on, MLGW does not create its own electricity.

It all comes from Tennessee Valley Authority, including the power plant, what used to be known as the old Allen power plant, but the power plant down at [indistinct].

- The combined cycle plant.

- The combined cycle plant.

Thank you, Bill.

I should say we've reached out to TVA representatives.

We had the CEO Jeff Lyash on in the past, and we hope to have TVA folks on in the future, as well as folks from MLGW.

We're in the middle of an RFP process.

I'm gonna turn to Bill to maybe just kind of define the outlines of that.

And I know we'll talk a lot about that RFP process tonight.

- RFP is a request for proposal.

Very common term and process that is used in government.

Basically this is to take price quotes from people binding ideas and estimates on what it would take if Memphis Light, Gas, and Water was not being supplied power by the Tennessee Valley Authority, but was getting that electric power from other sources.

That includes transmission systems.

It includes the idea that Light, Gas, and Water could generate some of its own power.

What's been talked about is possibly just light, gas, and water hiring out to someone to build some generation capacity, and then run it for the utility.

Also renewable sources of energy.

Taking some price estimates and quotes on what that would be like to have that involved in the mix here.

This will go to the Light, Gas, and Water board around the end of this with a recommendation from the consulting firm that is in effect running the RFP process.

That's GDS Associates, a company out of Marietta, Georgia.

They will make a recommendation.

The CEO and president of Light, Gas, and Water, JT Young, will then make his recommendation to the board of Light, Gas, and Water which will vote on it.

And the decision will most likely go from there to the City Council, basically for ratification of this decision since it's a city owned utility.

- That is great, thank you.

And so I'll bring you guys in.

You've been in this conversation for at least two years, formally as part of 450 Million for Memphis, which is actually being dissolved or has been dissolved.

And I'll let you all talk about that.

And that 450 for Memphis, 450 million, is really the savings that you all calculate are possible by a new arrangement for power supply.

And now I'll shut up and let you guys talk about your position.

- You mentioned the 450 M, the name that we came up with is based largely on MLGW's own consultant GDS.

In 2019, they produced a study by GDS to look at all of the unsolicited proposals they've been getting, MLGW's been getting.

And GDS's own scenario to get power from MISO, The Midwestern Independent System Operator, said they could get savings of about 428 million.

So that's their number-- - Per year or total?

- Per year.

And so we just extrapolated out a five year term out period, and with inflation and cost of fuel, settled on 450.

It's not a science, it's an art, but that's where the name came from.

- Karl, why are you in the middle of this?

What do you wanna see happen?

- Sure, Jim and I are both lifelong Memphians.

And for me, I have never seen an opportunity that could be more transformational for this city.

That's put things in perspective.

Our annual city budget is about $700 million.

Whatever savings we get, and let's say it's 400 million a year, half of it could go to the city budget, and the other half could go to the rate payers, resulting in about a 20% reduction for every residence, church, hospital, retail store in Memphis.

That is a big number.

And if this city, if you ask any councilman current or present what they could do if we had 200 million a year recurring revenue to our budget to fix things like education, our roads, mental health, police, fire protection, et cetera, it is transformational.

How is this possible?

Our contract with TVA, which is a monopoly, actually last monopoly in this country, allows for us to give five year notice and leave and not have any obligations when we leave.

Conveniently for Memphis, unlike others, we are adjoining Mississippi and Arkansas, which is part of a nonprofit network called MISO that goes from Louisiana to Canada that happens to be three times the size of TVA and every bit as reliable.

And we can connect into that for mere pennies on the dollar and get energy savings that we estimate to be 400 million a year.

- I'm gonna bring Bill in a second, but let me also say people aren't as familiar with you all, as I've known both of y'all for some years.

You came to this, this is not your job.

It's a volunteer position for both of you.

Your background and why you were drawn to this each of you, so for people, again, who don't know you.

- My background is 24 years in the municipal bond market.

Which includes utilities, such as MLGW.

Karl asked me two years ago to read the studies that were posted on MLGW's website.

I said, sure, I'll do it.

And as a municipal bond professional, I was stunned at the brazenness of the results that the MLGW, the draft IRP was concluding.

That we couldn't have a new electricity arrangement without issuing $8 billion worth of MLGW debt, which would be electric lean revenue bonds, and that's simply not true.

We have said that you can do it without issuing debt, and we stand by that.

- But as someone in, do you have a financial interest in this?

- No, not at all.

- But I gotta ask, right?

- Sure, none whatsoever.

- How did you come to this in your background?

- So, one, Jim and I both posted every penny we've raised on our website.

Most of which came from us, and we both signed agreements that we do not have a financial interest now or ever will be in any alternatives.

But I have been a critic of TVA for over 20 years.

In 2003 when I was leading the effort to try to get the panda exhibit to the zoo, I had noticed an article in the paper where TVA gave $10 million to the aquarium in Chattanooga and five million to the Smokey Mountain tourist attraction in Knoxville.

I called then Chairman of Light, Gas, and Water, Herman Morris, and I said, hey, I want them to give something to the zoo, which will be the number one tourist attraction in the state.

And Herman's words to me were, I'll support it, but TVA doesn't answer our calls.

We get nothing out of TVA.

Fast forward, TVA's largest customer is Memphis.

We have 10% of their business, and over a billion dollars a year.

They have 12,000 employees, only 100 in Memphis.

They do not give back to this community.

Never have.

They're now trying to pay a little catch up by spending lots of our rate payers money hiring lobbyists to make it look like they're doing something that they never have.

- All right, let me get bill in here.

- So we are past the initial stage of the RFP.

I think we got something like two dozen different proposals and different areas of this.

How do you all think the RFP process has gone?

Has it been fair?

- No, it has not been fair, and let me just give you some concrete examples.

We opposed the original RFP, the City Council voted it down.

And then the Mayor Strickland, to his credit, reached in, and the reason we opposed is 'cause we didn't think it was gonna be fair then.

He reached a compromise in writing that said among other things that the RFP process was gonna be open, and it was gonna be one that allowed all options to be on the table.

After the RFP went out, my colleague Jim took the time to read the RFP and determined it was in fact not open.

Wrote a letter to the mayor who then sent it to Intervision, his consultant, who wrote a four page letter and gave 17 reasons why the RFP was not open and was not fair.

As a result, they amended, at the last minute, one of the three RFPs, we still contend they didn't amend the other two, to say we will now make it open.

I will just say that that is evidence that the process was intended not to be what everybody had agreed to be.

What we have is JT Young and the administration have consistently opposed the RFP.

Last February, they went to Light, Gas, and Water board and asked them to end the RFP, and it got voted down three to two.

Fortunately, Strickland and others opposed it.

He openly opposed the RFP.

For four years, what Mr. Young and his staff have been is consistent.

They've consistently stonewalled, they consistently have favored TVA, and they have consistently shown their bias.

We do not have an independent, transparent process going on today.

No one can see anything except JT and his consultant who have consistently favored TVA.

This is the biggest decision in the history of the city of Memphis, and it demands and requires openness.

And I'm hoping that the Mayor and the City Council will say we wanna be involved.

We wanna look behind.

If you have anything going on here, you have history of bias.

- Jim, your point of view on this?

And I believe your specific objection was that the wording of this should've said if you have a proposal or a scenario for providing electric power to Light, Gas, and Water that does not fit what specifically has been talked about, you can submit that too.

- That's exactly right.

The Mayor on March 15th, 2021 sent a letter to MLGW Board City Council staff saying this is my compromise to get this stalled process proceeding.

The issue was exactly that.

MLGW's staff wanted it solely to be on the IRP, which was a high debt, high cost study.

We said no way, there are lease options out there.

They should be able to give what you think is the best option.

The mayor supported that.

The MLGW board supported it.

City Council voted for that in March and in April of 2021.

In July, the first of the three RFPs went out, which was transmission.

I think I'm the only person in the city that bothered to read it because it jumped out to me immediately that said Memphis shall own and operate the transmission assets, which means that leasing options are not available.

And what does that mean?

The cost of the 42 miles of transmission must be funded by MLGW on the electrical lean revenue bond.

And we don't know what that'll cost, probably 750 million to a billion.

So that means it must go on the balance sheet, and anybody in the city administration who thinks that that's okay gets an F in public administration for okaying a billion dollars to go on our balance sheet when it's unnecessary.

- Your point is it be leased instead of purchased?

- Yes, in fact.

- And we have a transcript of a Light, Gas, and Water board meeting, and hats off to one of the then commissioners, Mr. Wishnia, who asked GDS, said, is leasing an option?

And the GDS consultant said, yes, it should be.

In fact, it's the best option so you don't cloud up your balance sheet.

That is GDS responding to the commissioner.

And yet, they turn around and issue an RFP that says that is not an option.

Why, because it will make it look like we have to spend this money to leave, when in fact, we don't.

- At this point, no one other than GDS has seen the proposals that have come.

Have you guys seen any?

- No, they aren't allowing anybody.

- Right, and that is usually how a process like this works in terms of taking bids up to a certain point.

- Well, I don't know that I agree with that at all.

RFPs are different.

You said that it's a classic term and it is.

First of all, I will tell you I've never seen in government or private sector an RFP process that takes four years.

We are now in our fourth year, and it has been delayed.

I challenge anybody to give me an example of an RFP process that has taken four years.

Secondly, what Light, Gas, and Water did is they wrote language in the RFP to allow them to be the only ones to look at.

It is not always the case.

In fact, there is state law that requires transparency at certain stages.

Light, Gas, and Water has done everything they can to circumvent that.

- I think when the City Council voted in March of 2021 on the process, they said that, it was said that MLGW would and its consultant would be the third party to select to determine what's viable.

We didn't like it then, but at least we thought that since it was lawfully voted on to provide other options, we said fine.

Then we determined, we found out that, and the mayor's consultant Intervision confirmed in writing that the thermal transmission, the thermal generation and transmission RFPs were not compliant with make it clear other options are available.

That was the final straw for what we considered credibility for MLGW being an impartial judge.

- We have about 10 minutes left here.

Let me go a little bit bigger picture on this.

I've heard lots of people who are frankly, no fans of TVA, who are frustrated by them.

And again, I should remind people we've reached out to folks from TVA and hope to get them back on the show, as well as folks from MLGW to get their perspective on this.

And we'll be talking the mayor and City Council people as this goes forward.

That people who have said who are not fans of TVA have said, well, at the very least, this process gives us a chance by look, if the RFP process works, we can get a much better deal from TVA than we have right now.

Would that satisfy you all potentially?

I mean, is it anyone but TVA no matter what?

Or is it a better deal from TVA from your point of view?

- You know, first of all, TVA has been all over the board.

They have publicly said we will not negotiate.

By law, they have to offer us exactly what they do everybody else.

They said they would not put in a bid.

And yet, recently, they just put in a bid.

So they've backtracked, and we don't know what that means.

What I do know is this.

Is that there have now been four studies that have shown savings, including Light, Gas, and Water's own internal savings of 150 to $450 million.

Those are big numbers.

I cannot see any reason you would stay with TVA who has a legacy history of ignoring Memphis, and walk away from 150 to 450 million of savings.

Now, there are a lot of issues, including reliability, et cetera.

And MISO, which has from New Orleans to Minneapolis, cities that contend their reliability is every bit as good, and there's no reason to think there isn't, I just don't see why you walk away from that kind of savings.

- Go ahead.

- You asked about negotiating with TVA.

As Karl said, the TVA power contract with all of its local power companies in their footprint is identical What they can do is dull out their economic benefits.

- Which they've talked up a lot.

- Which they historically funneled all the East Tennessee to their neighborhood there.

What they have done is told Memphis that we're gonna owe employ people to improve houses here, and we're gonna do this and that, but the economic scope of what they're saying they're going to do is peanuts compared to-- - Let me keep moving, I don't mean to cut you off, but let me keep time here.

The other criticism I hear of leaving TVA is, would MLGW have to generate some of its own power, right?

And does this put more responsibility on MLGW and people, not everyone, but there are different critics out there are worried about MLGW is struggling enough, right or wrong, to keep the infrastructure built up to keep, you know, to do its current services without the big, even if they are imperfect, the big, reliable source of TVA.

Are we putting too much pressure on an organization that is not always performing it the best?

By which, they mean MLGW.

- The answer to your first question is no.

MLGW does not have to build its own power plants.

We've said that from day one.

What the GDS consultant that Karl mentioned in the MLGW board meeting said, have a third party build it and lease it under a long term lease, completely different.

- But the criticism is, is MGLW capable of managing that sort of arrangement, that sort of contract, and be more hands on?

Even if it is a third party.

And again, people come off, the reason I historically have-- - It's exactly what's happening now.

- It is exactly what's happening, and I think people also have to ask this question, is TVA competent to manage it?

We have coal ash bills in the history of TVA that have wiped out thousands of homes.

We have an environmental record of TVA that is given an F by many.

They have been misusing their funds, and they have a history of it.

Last November, and I rarely ever agree with Donald Trump, he criticized that the TVA board was paying Jeff Lyash 7.9 million a year, the highest paid official in the United States.

And he asked for his removal.

He couldn't remove him.

He fired a couple of TVA board members.

In February, right after Donald Trump left office, the outgoing TVA board gave Jeff Lyash a $2 million a year raise.

He now makes 9.9 million.

That is just one small example of the evidence that TVA has been misusing our rate payers' money.

- Let me bring in Bill.

- Mayor Strickland has said that, basically, once this RFP process is done, that the city, his administration, and the council members will then look at it and determine whether or not it was a fair process or not.

What do you think about that?

- We're asking him to not wait until the process is over to determine whether it's fair, but to get involved now and make sure it's fair.

And we have reason to do it.

Right now, JT is set up as the only judge and jury of this, and he's already shown his bias.

In a prior life, I practiced law.

If a judge said he had already made an opinion, you ask him to be removed or he steps down.

JT has repeatedly said I'm against the RFP, and I'm for staying with TVA.

Why should we allow him to be this sole arbitrator in secret of this process?

- To that specific point, didn't JT Young move to push this process to the side after the City Council had denied the contract with GDS?

- At one point, he did, but after they renewed it, he went to the board and asked them to end it.

- I think though, my point on that is that he went to the board to ask them to push it to the side because the Council had denied the contract, and to him, the process couldn't move forward without that.

- JT has been on record long before that of a history of staying with TVA openly and publicly.

So he can't use one City Council vote that questioned whether he was gonna do an RFP process as a reason that he had an epiphany to now, all of a sudden, I don't wanna go do it.

He's got a four year history of opposing this.

- The City Council vote you're referring to was the vote that down the MLGW executive management proposal for how the RFP would work.

And that RFP was based solely on issuing all debt through MLGW and having fixed requirements versus an open RFP where best ideas are submitted.

That's why it was voted down.

And-- - Why, with just two minutes left here, you mentioned early, and I think Bill had reported on this, you actually have dissolved 450 Million for Memphis.

Why is that?

Are you guys getting out of this argument?

- No, we're not, but it it's run its course.

We ask people just like you ask where's the money come from?

We posted where every penny went.

We just wanna be citizens now and continue the fight.

And I just want to end by saying, thank goodness for Cheyenne Johnson, JB Smiley, and Jeff Warren and others on the City Council who are demanding now that they get to be part of the process.

And we hope Mayor Strickland who has been wise enough to hire his own energy consultant, the same one who said the original RFP was totally flawed, that we want them to be involved.

Why not on the most important decision have other people's eyes look into this now, not wait until at the end and say whether it was good or bad?

Let's get involved now.

The more the merrier.

- So you all are gonna stay in the debate as well?

- Absolutely.

- Just not through the entity.

- Having a 501(c)(4), it ran its course.

We got lots of supporters, including three former mayors, all of whom supported us in what we were doing.

Lot of city business leaders.

And so, it's just a distraction.

It's run its course, so we dissolved it, and we're still here to talk.

- Last question.

- What kind of discussion, public discussion do you think there's gonna be once this comes down to a recommendation?

- Well, I think part of it's gonna be depend on if we can get the process to be open different than what it is now and we can have true, independent experts opining.

Not anybody but independent, true transparent.

If we get that, I think the evidence is gonna make it much easier to make a clear decision.

- This is not about electricity.

It's about buying, it's about common sense.

Let the chips fall where they way.

We are not energy activists.

We are advocating for a clean, open process.

- All right, we will leave it there.

We will obviously be doing more shows on this, and Bill and others will be writing about it.

Again, repeating that we've reached out to TVA, and we will, again, to MLGW to get them on, and we'll certainly get some City Council folks in the Mayor's office on just talk about as well.

Thank you both for being here.

I appreciate it.

Thank you, Bill.

That is all the time we have this week though.

If you missed any of the show today, you can get the full show online at wkno.org or you can go to YouTube and search for Behind the Headlines.

You can also get the full podcast version of the show, which actually usually has an extra five minutes of questions and answers and so on.

You can get that on iTunes, Spotify, The Daily Memphian Site, or wherever you get your podcasts.

Thanks, and we'll see you next week.

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