Memphis Light, Gas and Water will go out for bids on its power supply, making the possibility of leaving the Tennessee Valley Authority more likely — but it remains a distant hypothetical option.
CEO J.T. Young told the MLGW board of commissioners that he wants the utility to go out for bids, a crucial step in the city-of-Memphis owned utility's potential departure from TVA — the only power provider Memphis has known for most of the past eight decades.
In a widely-expected move that Young foreshadowed Tuesday, he said issuing a request for proposals would allow MLGW to firm up the projected savings numerous studies.
"These types of decisions do not need to made hastily," Young said, adding that the potential departure for TVA and any results of the request for proposals would have to be deliberately studied.
Young said the bidding process will be anchored to the future scenarios outlined in the integrated resource plan, which suggests under a few preferred scenarios that Memphis build natural gas and solar electricity generation. But he said the bidding process would be open to "alternative scenarios."
Advocates for leaving TVA have pushed for a wide-open bidding process or for a firm called ACES Power Marketing to conduct the bidding process. It has sent MLGW, and Memphis Mayor Jim Strickland, a proposal for how that bidding process would work.
The plan, finalized earlier this month after more than a year of analysis, showed savings of about $122 million a year if MLGW leaves TVA, builds solar and gas generation and builds transmission lines that connect it to the Midcontinent Independent System Operator, a power marketplace and grid operator that covers much of central North America.
Those transmission lines would potentially connect to MISO-member, Entergy, a for-profit utility. On Tuesday, Entergy, like some local advocates of Memphis leaving TVA, told MLGW it does not believe Memphis needs to own or operate power plants. It instead pitched the utility on wheeling power to Memphis and said plenty of other power is available.
“In Mississippi and Arkansas alone, there’s over seven gigawatts of solar projects already in the interconnection queue that could be taken advantage of ... The important thing to recognize is that MLGW does not have to become an operator of power plants,” Haley Fisackerly, CEO of Entergy Mississippi, told the MLGW board Tuesday. “We believe an open-ended whiteboard, if you will call it, (a request for proposals) allows bidders that flexibility to show you some of those options.”
At present, TVA supplies Memphis with all of its electricity. MLGW is the largest of 154 local power companies that are a part of TVA and represents about 10% of the federal power provider's annual revenue.
Further coverage: It won't budge on rates, but here are 3 ways TVA is enticing Memphis to stay
TVA offers to bring 100 jobs to Memphis and says it would buy MLGW's electric transmission lines
The bidding process on MLGW's power could start by September.
In his presentation to the board, Young recommended that the utility conduct a competitive bidding process to determine what consultant should issue its power supply bid. That process is projected to be complete and a consultant selected by Oct. 6.
However, the MLGW board and Commissioner Mitch Graves told Young to move quicker than that timeline and to select a consultant to do the RFP and not put it out for bid. At a later news conference, Young said the utility would finalize the scope of work for any potential consultant.
Staying with TVA still on the table
Young's presentation also does not remove TVA from consideration.
"MLGW is a TVA customer today and will continue to engage with TVA on its proposal for additional value that was not available for consideration in the IRP," the presentation said.
In recent months TVA has worked hard to keep Memphis, pledging to bring 100 more jobs to the city, investing in energy efficiency in core city neighborhoods and buying MLGW's transmission system. However, its CEO Jeff Lyash said in December 2019 the power provider will not reply to any power supply bids MLGW issues. He also said its offer on electric rates to Memphis will be the same as what it is offering other local power companies in its footprint.
In a statement, TVA expressed respect for its largest customer going out for alternative bids, saying it believes that MLGW's best power source remains TVA.
"TVA respects and supports MLGW’s decision to pursue Request for Proposal’s (RFPs) as it looks to its long-term energy supplier.We are excited about the opportunity to engage in the RFP process — put the facts on the table — and prove that TVA in partnership with MLGW is the best option for the people of Memphis and Shelby County," TVA said.
Buddy Eller, TVA spokesman, provided some nuance to TVA's previous statements about not replying to a request for proposals later Wednesday. He said that TVA will be engaged through the RFP process and formal written replies to MLGW's requests could come depending on how those requests are structured.
At a Wednesday news conference , Young said that MLGW would continue to consider the 20-year proposal on power TVA is offering and the other, economic development inducements it recently proposed.
Is MLGW losing money by waiting?
Throughout Memphis' evaluation of its power supply, some have said the process is moving too slowly. Many advocates for a TVA switch, including Rep. Steve Cohen, have said Memphis is losing $1 million a day every day it remains in the TVA.
On Wednesday, Graves, as he urged MLGW leadership to move quickly with an RFP, told Young and COO Alonzo Weaver that there is money on the table.
When asked later if MLGW, and Memphis, is losing money by waiting, Young said, "It's a tough question to answer ... It's possible, but I would just lean on what I've seen in the industry when it comes to big deals like this."
Young said there are risks associated with leaving TVA.
"These are risks that we can't quantify in dollars: Regulatory risks, environmental risks, land issues; acquisition issues; there are things that are not quantifiable," Young said. "We need all due speed moving through the process so we can get to an answer. I definitely agree with that, but what I don't to do is move quickly under the presumption that the savings are so large ...
That's what I've seen in my experience — that you get focused on something that causes you to miss some other things you thought you were going to have may not materialize, and then you're too far down the road to get out of the situation ... I don't want to put this community or MLGW customers in that predicament."
Samuel Hardiman covers Memphis city government and politics for The Commercial Appeal. He can be reached by email at samuel.hardiman@commercialappeal.com or followed on Twitter at @samhardiman.
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