Electric Department Challenge Is Managing Spiraling Costs While Improving The Grid
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DAVE’S WORLD
By David Howell
In the newspaper reporting business you learn a little about a lot – meaning you write about many different subjects and try to understand enought to explain to the readers. One week I may be on the trail of a complex court case and the next week writing about federal funding for an electric department.
With that in mind, I thought we would revisit last week’s story about federal funding from the U.S. Department of Energy’s GRIP (Grid Resilience and Innovation Partnerships) Program for the City of Water Valley with a few more details. The first thing to remember is that federal funding for upgrades to municipal-owned electric departments is rare. This means the GRIP Program is a unique opportunity for Water Valley.
Now input from a quick Google search – as part of the Bipartisan Infrastructure Law, The Grid Deployment Office is administering the $10.5 billion GRIP program to enhance grid flexibility and improve the resilience of the power system against growing threats of extreme weather and climate change. I’m not sure if the city’s grid challenges are weather-related, but I’m sure our challenges are as good as another other provider.
I learned during the monthly city meeting on March 5 that Tennessee Valley Authority (TVA) is working with a handful of city-owned electric departments in connection with the GRIP program and Water Valley was the last admission.
That is the background and inclusion in GRIP will allow the city to leverage approximately $1.6 million in funding the city’s electric department has been allocated for matching money.
What I didn’t mention in last week’s story are details about the origin of that $1.6 million. If you recall, Mayor
Tommy Reynolds helped secure $1.25 million for the electric department during his former role as state representative. This included $750,000 for work on utility poles in the city for fiber deployment and $500,000 for the electric department following the city-wide outage in January, 2022.
The city also received $367,524 from the Delta Regional Commission to install a backup transformer in the city. This totals just under $1.6 million, and using these funds in connection with the GRIP program will generate another $1.6 million for the city electric department for work on the grid.
If the city can come up with additional funds for the electric department, the GRIP Program will also match that. Basically for every dollar that is invested into the city grid, GRIP will provide another dollar.
In a recent conversation with Yalobusha County Economic Development District Executive Director Kagan Coughlin, he explained that infrastructure upgrades are often funded over a lengthy period because the upgrades will benefit residents for decades. The challenge is to find more up-front money to leverage the GRIP Program beyond the $1.6 million for the electric department that could be repaid over time. It may be too early to know what those options are, but obviously coming up with more money would make the GRIP Program even more beneficial to the city.
Where to find this money is above my pay grade, I am not sure if the city is in a position to borrow money for the electric department without increasing the cost of electricity to consumers to repay the borrowed money.
And that brings us to another challenge, electric department officials have recently stressed the need for a five percent rate hike to cover the spiraling cost of maintenance. We all know inflation has hit our pocket books in recent years and it is the same for the electric department.
Last year (TVA) approved $15 billion in investments over the next three years to build additional generation and upgrade the existing system to ensure the region continues to benefit from reliable power.
The announcement was accompanied by a 4.5 percent increase for the cost of electricity, and the city had to raise the rates accordingly as electricity that flows to the city is purchased from TVA. This means people pay more for electricity in Water Valley, but it does not benefit the local department.
Most experts believe future rate hikes are coming from TVA to fund this $15 billion investment, possibly as early as late 2024.
That is the current state of affairs – the city’s electric department is already operating on a lean budget and needs more revenue for operations.
The city grid also needs upgrades and the GRID Program is a golden opportunity. The looming question is how to balance these challenges and improve the grid?
