TVA phases out rebates for home energy upgrades that do not build their electric load

Brittany Crocker | Knoxville

Show Caption Hide Caption What does TVA do? The Tennessee Valley Authority is a federally owned electricity corporation. An act of Congress established the company in 1933 to help the Tennessee Valley overcome environmental and economic problems. Now TVA provides power for the entire state of Tennessee and parts of six bordering states. The corporation also provides flood control, navigation and management for the Tennessee River System. The company has a diverse power plant portfolio that includes nuclear, fossil, diesel, hydroelectric, natural gas, solar and wind energy. The corporation funds its own operations by the sale of its electricity to power distributors.

The Tennessee Valley Authority is phasing out many rebates its e-score energy efficiency program offers. The program allows homeowners to get rebates for upgrades that make their homes more energy efficient.

Rebates for Energy Star windows and doors ended in December. Now, a banner on the program's website says it will discontinue nearly all of its available rebates when the money for this year runs out, or by Sept. 15, whichever happens first.

Some rebates still available

TVA spokesman Scott Brooks said TVA will continue to offer rebates for specific technologies that use electricity.

Switching to an electric water heater from a non-electric water heater will still warrant up to a $500 rebate per system. However, the cost of natural gas is low compared to current electricity rates, so the rebate might not be that appealing to homeowners who are making the upgrades to save money.

Air sealing, attic insulation, heat pump water heaters, geothermal or dual fuel heat pumps, energy-efficient air-conditioning, duct systems and tune-ups will no longer receive rebates.

Southern Alliance for Clean Energy director Stephen Smith said TVA's move toward replacing gas appliances with electric is called "beneficial electrication."

"That's now their version of energy efficiency, encouraging customers to go from a cheaper gas furnace that is minimally efficient to some sort of electric thing that's more efficient."

While electric appliances are cleaner, they don't necessarily conserve energy. They do grow TVA's electricity load, however.

Where the funds go

Brooks said a third-party researcher suggested consumers really valued the rebate program for its network of contractors and local power company support, not the assistance in purchasing home upgrades.

"The research also shows declining value for the actual rebates," Brooks said. "People would likely do the upgrades even without the incentives."

He added that energy-efficiency resources normally allocated toward upgrade rebates will instead be directed toward programs that help limited income families in Nashville and Memphis.

"Memphis actually has the lowest power rates in our service territory, but one of the highest numbers of low-income households," Brooks said. "Nashville is our second largest customer and, like Memphis, were able to show how the funding could benefit customers who need it most."

He said TVA is still looking at other areas to provide funds to, including Knoxville.

Smith said he is concerned TVA's donations to limited income weatherization programs will not equal the amount of energy efficiency dollars the utility has cut.

"When we look at what TVA is doing, we feel they are abandoning their commitment to energy efficiency," Smith said. "They're putting a few million in high visibility weatherization approaches and in Memphis, the need is so great that barely scratches the surface."

"What they're not telling people is they cut more out of their energy efficiency programs and focusing on beneficial electrication that builds load for them," he added. "It's a devious misdirection."

Energy efficiency

The reallocation of energy-efficiency funds points showcases an interesting point in TVA's view toward energy efficiency over the last year.

While Brooks said "energy efficiency continues to be an important part of TVA’s mission of service," the utility's behavior over the last year has suggested different views.

TVA CEO Bill Johnson and other company representatives have blamed energy-saving technologies for a decrease in revenue used for maintaining the electricity grid.

The company has rolled out plans to discourage large customers from making renewable energy commitments at its Tennessee Valley Industrial Committee meetings, and an upbeat video presentation from the Tennessee Valley Corridor summit further drove in its point.

More: Study: TVA service costs burden residential customers over industry

"We're in an unusual spot," Johnson said in the video. "We have more customers today, more meters, more direct-serve customers, but usage is declining (...) faster than we can add new customers."

The video decried Volkswagen Chattanooga Assembly plant's addition of nearly 34,000 solar models to its facilities.

TVA passed a controversial rate structure change in May that cuts its wholesale power rate by a half-cent per kilowatt-hour and imposes a fixed half-cent “grid access fee” per kWh instead. The fee should shift about $600 million per year from variable to fixed revenue.

It's less than was originally proposed, but Smith said his group is concerned the small hike is temporary and the grid access fee will grow over time.

More: Why your Knox utility bill keeps going up — and why it may keep climbing

TVA says the charge will be "revenue neutral" for them, but environmental and ratepayer groups have said TVA's spending behavior leads them to question the decision.

"I think there's an inconsistency between having these high executive pays while at the same time cutting programs that help people pay their bills," Smith said, referring to Johnson's $6.5 million compensation package and TVA's corporate air fleet.

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"To claim you are sensitive to reducing costs and at the same time boost profits and buy corporate toys and whatnot, it's just very inconsistent. These programs really help people. I don't think those jets really help anyone."

Johnson, who is the highest paid federal employee in the country, has said the rate change will even the playing field for customers who cannot afford to make energy efficient upgrades to their homes.

TVA's reasoning has been that people who have made upgrades to save money can afford any increases the fixed rate change might add to their bill.

More: TVA agrees to new fixed fee as customers accuse board of shifting costs onto poorer ratepayers

More: TVA rate change could penalize ratepayers for low energy use

The fixed-rate addition could translate to higher rates for families of all economic classes trying to save on electricity, however. Data from the National Energy Information Administration show low-income American families used energy amounts equal to or less than their median or higher-income counterparts.

A spokesman for TVA said in December the utility may not be able to discern from behind the meter between a low-income family using less electricity from a higher-income family that has made energy upgrades or implemented solar power.

It has not yet been seen whether the redirecting of rebates to low-income weatherization assistance programs may cancel out hikes that energy-saving families with limited income could see with the structure change.