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- TVA CEO on 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 President and CEO, Jeff Lyash from Tennessee Valley Authority.

Jeff, thanks for joining us from Chattanooga.

- Glad to be here, Eric.

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

So, Jeff, I think we were talking a bit, it was about a year and a half ago that I think that we had you on, it definitely was in COVID.

Someday we'll have you here in the studio in person, but appreciate you being here.

For those, not following this as much as obviously we are and certainly that you are.

TVA has an 80-year relationship with MLGW providing all of the electricity to the MLGW and to all Memphis customers.

It has come up over the last couple years that MLG&W and others in Memphis are exploring the possibility of going somewhere else for that supply of electricity.

MLGW has to give five-year notice to TVA.

And the city is right now, MLGW, which is owned by the city is in the middle of a request for proposal process that will kind of unroll through the course of this year.

Jeff, MLGW is the biggest customer for electricity for TVA.

I think it's about a billion dollar give or take in revenue, and about 10% of total revenue for TVA, you can correct me if that's wrong.

I assume you all are bidding to keep the business.

And what is your case to the average customer?

I mean the average voter.

What is your argument for MLGW staying with TVA?

- Yeah, pretty straightforward.

We've been serving MLGW partnered with MLGW Memphis and Shelby County for over eight decades.

And, you know, frankly, Eric, we provide some of the lowest costs in the country.

TVA's lower cost than 80% of the utilities in the country.

And in fact, partnered with MLGW, MLGW's customers received the second lowest rate of any peer city in the nation today.

And TVA's reliability is the highest in the country.

In fact, we have not interrupted a single delivery point for MLGW on over 20 years.

So this discussion is not really about cost or reliability.

I think the case there is incredibly strong, but you know, the partnership between MLGW, Memphis, Shelby County and TVA is more than just about cost or reliability.

No other provider is gonna deliver the economic development that TVA brings to this region.

We've brought, been part of bringing over $50 billion worth of investment over 350,000 jobs to the broader region over the last five years.

And just there in western Tennessee, last year was almost 6 billion of investment in 40,000 jobs.

And that doesn't count Blue Oval City which we are key to.

So, I mean, it's less that we're bidding it, then we're promising to continue to deliver the low level of cost, the high level of service, the economic development impact that the Memphians and the citizens of Shelby County deserve.

- We'll break, we'll go through all the various points that you just brought up.

I do wanna start with cost though.

I mean, some people have said, and we've had 'em on the show that there's as much as $450 million in annual savings that could be found by going to a different provider.

The bids, I think there are some 25-plus people who are organizations that have bid on various parts of the RFP.

And again, you did say you are right by all accounts.

TVA has made a bid in this process, is that correct?

- Yeah, we have the proposal on the table and it's out in the public.

So folks can see that.

It's not withheld.

We published that over two years ago now and reput it forward recently in response to the RFP.

- Yeah, and most of the proposals have been, are not public yet.

JT Young, CEO of MLGW, was on the show recently said that some amount of that will become more public before they all becomes public in the fall or winter.

But what your proposal does it include any amount of annualized savings?

I mean, what are the, what are or is it a straight-line cost stay the same going forward?

- Yeah, so let me address that, Eric.

So first of all, you mentioned this notion of $450 million of savings.

I'm surprised you say that because that number's been so totally discredited.

Even the MLGW study that was done, which was quite well done, put forward a potential savings of $120 million a year.

And as TJ looked at that, we provided feedback adjusting some of the assumptions to be factually correct, or to be a little less optimistic.

And we think that's a $270 million a year cost burden on MLGW customers.

So I don't see those savings, and I don't think anybody's frankly been able to demonstrate that.

To the contrary, if you are already the second lowest of any peer city in the country.

- No, and I did hear you said, but what, in terms of the proposal you've put in, does it represent separate from the, and there are lots of consultants and lots of experts out there that are gonna pick apart all these proposals.

And I'm not claiming that the $450 million is true to be clear, there's just different.

I'm just pointing out the extremes of this very complicated process.

But just to the TVA bid that you all put in, does it represent any savings to Memphis on an annual basis?

- Oh, yeah, absolutely.

I would tell you that TVA's projected flat rates for a decade in that proposal.

In fact, today MLGW rates are 2 1/2% lower than they were at the start of this.

If MLGW were to commit to TVA, those rates would be lowered an additional amount that amounts to tens of millions of dollars a year savings.

- Okay.

- And so we think that along with investments, the TVA would love to make around energy burden and economic development in core communities in Memphis, which we think is really one of the central issues.

You know, and at the end of the day, this is not really about fonts as I said.

We're already extremely competitive, we're already providing low rates and have already reduced rates by $200 million through our Pandemic Recovery Credit.

This decision is about risk.

It's about whether the rate payers for MLGW wanna take on the kind of capital investment, dependence on natural gas, entrance into a volatile market and take the risk that there may be savings out there for them.

When what TVA is promising to deliver is already here, - Okay.

- and being delivered today.

- Let me get, apologies to Bill.

Let me get Bill in here.

- Jeff, initially the thought was that TVA would stand on what it has offered in the past and would not necessarily make a bid as part of the RFP or request for proposal process.

What changed your mind on that?

- Well, the process was set up basically to ask us to bid.

There was an opening for us to put in a proposal, but Bill, to be clear, the proposal we put in, in response to the RFP process is the proposal that we are, have been prepared to delivered MLGW all the way along.

And it involves maintaining low rates, lowering rates further if there's a longer term commitment, helping MLGW establish some of its own generation, which we think will yield some additional savings.

And then implementing a tailored investment portfolio for the city that we think goes at the heart of some of the real issues, which is how do you draw economic development into core communities, how do we work together to reduce energy burden?

So Bill, we're in the same place we've always been, we're just trying to make that value proposition clear.

And so putting that proposal formally on the table as part of this RFP process is TVA trying to be helpful and supportive of that process.

- If Memphis Light, Gas and Water were to leave the Tennessee Valley Authority, we've talked about what kind of changes that means for Memphis Light, Gas and Water.

It would seem that it will also mean changes for the Tennessee Valley Authority.

Am I correct in that?

- Yeah, Bill, I mean, we all have been partners, as we said for nine decades with MLGW and their MLGW's decision on whether to stay with TVA or not is one we respect, and we've worked very hard to be helpful, to be supportive of the process.

At the end of the day for MLGW, we think it's a significant risk that the citizens of Shelby County are gonna bear.

And we don't think it'll produce a [indistinct] Now for TVA, we would love nothing more than to continue to serve the citizens of Shelby County, because that's what we do.

We're not a for-profit company.

We're not looking to make money off of a transition to another provider.

We're just here to support the 10 million people we serve.

Many of whom are there in Western Tennessee.

If MLGW leaves, TVA will adjust their capital investment plan.

We'll adjust our transmission, our generation build, and we'll separate from TVA, and we'll move on with the business of the broader set of customers.

And our focus will turn from supporting the citizens of Shelby County to supporting the rest of our remaining customers.

- What happens to the $1 billion Allen Combined-Cycle Plant in southwest Memphis, which we should point out, does serve the power needs of Memphis, but also serves the power needs of the TVA region in general.

- Yeah, Bill, what serves the citizens of Memphis is a 30,000 megawatt portfolio of assets located across seven states, tied together by the country's second largest transmission service.

That is important because Memphians get the benefit of nuclear power, hydro, solar, wind, gas storage at a scale that is what delivers the liability and resiliency that they experience from TVA every day.

You're not served by a single gas fire Combined-Cycle Plant at Allen.

That plant is an integral part of our broader system.

You know, if you exit TVA, you will be hanging your fate off of a fixed set of assets, gas assets there in western Tennessee, and some transmission lines across the Mississippi.

But that Allen plant is a valuable part of our integrated system, and it will remain that way.

That system just won't be the one that serves Shelby County if MLGW leaves.

- What happens to the old Allen plant?

You all, it is quite a messy place to put it lightly.

There's some ash and remnants of a coal that come with a coal fire plant that was there for many, many decades.

What is the status of cleanup?

And does that change if MLGW leaves TVA?

- Well, the short answer question is it doesn't change.

So the Allen coal station, which frankly originally belonged to MLGW, the City of Memphis and Shelby County, along with all the coal ash that had generated before it was transitioned at TVA ownership, I believe in the '80s.

We have stated very clearly that we're gonna maintain responsibility for that site under an agreement that was put together with the port authority, the county, the city, and MLGW, we're gonna decommission and dismantle the coal unit.

We are removing all the coal ash from those storage ponds that's in process right now, they're dewatered in the ashes in transit, being placed in an engineered special purpose landfill.

And we've permit it to do groundwater mitigation to remove any contaminants that are in the groundwater.

And that commitment has been clear and unchanging all the way through the process, and we'll follow through on executing.

- That there was.

- Regardless of whether MLGW stays or not.

- All right, that there was some dissatisfaction on the express by City Council members on the coal ash disposal from the old Allen plant.

Was there a better way to do this than to take it to a landfill here in Memphis?

- Not that our analysis uncovered Bill.

We put an agreement in place with the city, MLGW, the county, the port authority to responsibly manage this ash.

We are bound by the National Environmental Policy Act to follow a clear process that considers a wide range of alternatives against the number of criteria, not just cost, but other environmental impacts, economic justice, any discrimination or safety issues.

We followed that process.

We did it in partnership with those parties.

We did it under the watchful eye of the Tennessee Department of the Environment.

And out of that process, came a decision on, and the primary decision was disposal by removal that leaving it onsite at Allen wasn't the appropriate place.

And we took the best alternative from that.

And that is being executed today and quite successful.

- Bill, which landfill is that?

What landfill was it moved to?

- It was a landfill near the airport which.

- Okay, okay.

- Yeah, it's a Republic's landfill.

and, but it is a specially designed, dedicated facility for receipt of justice ash.

- And there has also been some reporting about the measures that TVA took in Kingston, Tennessee, where there was that horrible coal ash spill.

Are you having to go back into that site for remediation on those measures there?

- That there was a terrible coal ash spill back over a decade ago there.

TVA contained it.

We cleaned that up.

As a matter of fact, the environment there on those river systems in the area is better today than it was pre-spill.

That's not an opinion, that's a demonstrable fact on these studies on this.

And as part of that, we built state-of-the art ash handling and disposal facilities there.

What we did at Kingston has set a very high bar for the rest of the industry to meet and underlies what we're doing out there today at Allen, so.

- Okay.

- No, there are no contemporary issues out at Kingston.

It's very well done, very well maintained.

- You mentioned when you were talking about the power that TVA provides.

You didn't mention coal, but TVA does still a certain percentage of your overall electricity is generated by coal.

You've I think moved to, is it by 2050 that TVA wants to get rid of all coal or help me, help my facts there?

- Yeah, let me lay that out for you, Eric.

It's a really important topic, so.

- 2025, I read the wrong number in front of me.

Sorry about that.

- Yeah, TVA has already retired over 60% of our coal units, and court last year generated less than 15% of our energy, count from almost 70% in decades past.

And the remainder of those coal units will retire between now and 2035.

That's part of the plan we're executing to continue our industry leading Greenhouse Gas Reduction Program.

Already we've reduced 60%, and by 2035, when the last of those coal units is retired, we will have reduced carbon by approximately 80%.

- And it's 2050 is the goal to be net zero emissions.

I think I mixed up my data.

- That's correct.

- Let me.

- That's correct.

- Yeah, you mentioned the investments in terms of economic development in the broader region in West Tennessee, but, and many tens of thousands of jobs and hundreds of millions plus in economic development dollars, but specific to Memphis and Shelby County, that has been critics.

I'm not saying I wanted them, but the critics have said there hasn't been enough in Memphis proper or Shelby County proper.

There in a lot of people, point to the fact that TVA has big headquarters, big presence in Knoxville, and then Chattanooga, but a really modest presence in Memphis.

So talk about economic development in the Memphis and Shelby County area, and why does TVA not have a bigger presence in the city that is its biggest customer?

- Yeah, so let me start with economic development.

So in the past eight years, TVA's helped the attract or retain more than 40,000 jobs and 5.4 billion in capital investment in the Memphis region.

And so that's the portion of the broader economic there and that does not include the $5.6 billion, six thousand job economic development win that we working together, secured a Blue Oval City in Ford.

- Right.

To be clear, - And so I think.

- those are incentives like other incentives that are all part of the package.

I mean, you're not saying you put 5.6 billion into the Blue Oval project, or are you?

- No.

We declared that we help to attract to our lower, well, we helped to attract 5.6 billion of capital investment by Ford and 6,000 jobs.

That's in addition to the 5.4 billion of capital investment.

- But you have.

- Business that's been 40,000 jobs.

And so there's been substantial improvement there.

And let me tell you, part of the reason why Ford's there is our low rates, high reliability and clean energy.

- And that, let me.

- Now the question on.

- And that money, I mean that, the relationship with the Ford, and I'm sorry for the delay here, sorry about that, Jeff.

The money, the Ford investment, that's separate from MLGW, correct?

And this question of TVA and MLGW.

I mean, if MLGW left TVA, your commitment to Blue Oval would remain in place?

- Oh, that's right.

- Okay.

- But our focus on recruiting economic development to MLGW's footprint would not remain.

- Correct, okay.

- Our economic development focus is focused on those local power companies and communities that TVA serve.

So our economic development programs would remain, but the sharpness of their focus on MLGW and Shelby County would not.

Now to your other point, TVA's largest numbers of employees tend to be where our generating facilities are.

So we have a group of employees at our Allen plant, as well as permanent contractors.

As part of the proposal that we put on the table for MLGW, we committed to establish a regional headquarters in Memphis.

We have a Western region Vice President, Mark Gates, who heads up that organization.

And I committed to grow that organization with staff, primarily focused on economic development in Memphis, in core communities and energy burden reduction.

And we committed to grow at least 100 jobs in the City of Memphis at that western headquarters.

- Okay.

- So hopefully that answers the second part of the question.

- Yeah, it does.

Thank you, Jeff.

- And the terms of this are, this would be a 20-year agreement, correct?

Or has any thought been given to a shorter term agreement?

- No, the proposal that we made, Bill is what we would do with MLGW on recurrent five-year contract.

Separate from that is the long term partnership agreement, which includes a 3.1% reduction in rates.

It includes a different level of involvement in our long term planning.

It includes the ability and the assistance from TVA to site 5% of your own generation.

Those things are part of the long term partnership agreement, separate from what I've been discussing that we offered to all 153 local power companies.

As a matter of fact, 146 of them have elected to take that agreement, including many who first did their due diligence and determined whether leaving TVA was a better option, and concluded it was not.

- So is the five years part of it?

Does that count as part of the 20-year long term?

- Yeah, MLGW's currently on a five-year contract with TVA and many of these things I've talked about, the 100-person headquarters in Memphis, energy burden reduction, economic development, investment in the community, we offered that under the existing five-year contract.

We also offered the 20-year contract, which would subsume the five.

And along with that, comes a 3.1% reduction citing renewables, as well as the rest, that all by itself would save MLGW customers over $20 million a year in their power costs.

- Okay, with just a couple minutes left here, do you know who else has bid on the MLGW contract?

- No, we don't know, and really shouldn't know.

What we've tried to do is be supportive of the process, so that MLGW can get the modeling and the process correct, and other than that, we're a bystander.

- Is that typical and other?

I mean, you work all over the Southeast and I mean, is it typical that these are closed bidding processes?

- It is.

- Okay.

- There's been, and I asked that there's been a lot of criticism among some, they would like a more transparent process and all these bids and so on.

The other thing that, and I don't know that you have an opinion on this, but I do wanna ask because it was big-ish news in the sense that Mayor Jim Strickland and who will be on the show in a couple of weeks, floated the notion of selling MLGW.

It is a taxpayer owned, independent entity, floated the notion of selling it in part because of the reaction to the storm and the cleanup, and the idea of all the infrastructure improvement that needs to be done here, a billion to $6 billion to bury lines and so on.

Do you all have any opinion on whether, on the selling of MLGW, Jeff?

- No, this is, you know, this whole model is based on partnership between TVA and local power companies, but there's a strong [indistinct] of local control, and this is an asset that's owned by the City of Memphis and exactly the direction they go with it is up to them.

Our role in this would be to agree or disagree to assign the power contract to a new owner.

And that's a process we would have to undertake for ourselves as to whether we want it to have a relationship with a new owner or not.

- Can we go back to one thing you just mentioned onto Bill's question with just a minute left here about power generation in Memphis?

What form would that?

We've talked, and I think we've talked with you about the potential of more solar here that is, and that is owned by MLGW.

Is that right?

And what would your role in that be, TVA's role?

- Well, if MLGW elects to leave TVA, that they would need to build gas, fire generation simple and combined cycle, perhaps some renewables like solar and several high voltage transmission lines across the city.

That could be 6 to $8 billion worth of investment and the risk that comes with that.

With TVA, we have a very diverse portfolio of generation.

Our solar programs are growing day by day.

And if MLGW stays particularly if they stay under the long-term contract, they would have the ability, and we would assist them in building up to 5% of their generation in solar there in the region.

And they could also take advantage separately of solar programs like our Green Invest Program.

- Okay.

- But this is a program that industries and big customers take advantage routinely.

And the City of Knoxville has done 500 megawatts with us under that very program.

- All right, I'm sorry to cut you off, Jeff.

We are out of time though.

Thank you for being here.

Again, we've had the folks who are somewhat more critical of TVA on in the past, and obviously you can go back and see those past episodes on wkno.org.

Again, Mayor Jim Strickland coming up in the next couple weeks.

If you missed anything, you can get the podcast wherever you get your podcast, or you can go to wkno.org.

Thanks, and we'll see you next week.

[intense orchestral music] [acoustic guitar chords]