Your MLGW bill could go up by $60 a month. Why? TVA is charging its customers more.

Samuel Hardiman, Memphis Commercial Appeal
·4 min read
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This story has been updated to reflect the differences between the fuel cost adjustment the Tennessee Valley Authority is charging Memphis, Light, Gas and Water and what MLGW is charging customers for the fuel cost adjustment. 

Memphis, Light, Gas and Water warned Thursday that customers could see what they pay for electricity climb by 20 to 40% over the next several months — a jump that could mean up to $60 more on your MLGW bill.

In a news release, MLGW pointed to the fine print on customer bills as the reason why — the Tennessee Valley Authority fuel cost adjustment.

All of the power people in Memphis and Shelby County consume comes from TVA. MLGW does not generate electricity. Every local power company that belongs to TVA — MLGW is among more than 150 — pays the same fuel-cost adjustment.

MLGW customers pay for electricity by the kilowatt-hour — you're charged for how much you use.

MLGW rates per kilowatt hour are fixed and set by the Memphis City Council and can't change unless the body allows it. What is not fixed is the TVA fuel cost adjustment and that's what's driving the projected increase in MLGW bills. The fuel cost adjustment is how TVA recovers costs for fuels such as coal and natural gas.

On your June MLGW bill, TVA's fuel cost adjustment is 2.9 cents per kilowatt hour. That's going to jump 46% to 4.3 cents per kilowatt hour on July 1 and could rise further after that.

Differences between TVA & MLGW

There is some difference between the fuel cost TVA is charging MLGW and what MLGW is passing on to consumers.

TVA says its fuel cost adjustment is going up to 3.82 cents per-kilowatt-hour. MLGW says that is only a wholesale rate and the actual rate consumers will pay after MLGW recoups the costs of getting electricity to residential customers.

MLGW CFO Dana Jeanes said, "To get to the retail level, distribution losses are added. Distribution losses account for the power that is lost in all of the wires/transformers and other equipment to get from the delivery point with TVA to the individual customer residence. That adds an additional 0.2 cent."

Here's how the fuel cost adjustment affects your bill. If you want, you can take out your bill (or pull it up online) and follow along. Any calculations in this article would apply to you — your usage might vary. But residential rates are the same.

More: Three questions and 5 takeaways about the potential Memphis, Light, Gas and Water-TVA split

More: Businessman who pitched Memphis on nuclear power now has a different offer — solar and natural gas

How the fuel cost adjustment works

A Midtown Memphis apartment (this reporter's) paid $78.40 for electricity from May 11 to June 10. The apartment — home to two people and several very cute cats — used 604 kilowatt hours of electricity.

Every MLGW customer pays $13 a month in a base service charge. Then they pay MLGW's residential rate of 7.9 cents (the rate goes down to 7.8 cents per kilowatt hour after the first 500 is used). Then they pay the TVA fuel cost adjustment.

Here's how it breaks down:

  • Total electric bill: $78.40

  • $13 a month service charge.

That means what the apartment actually paid for consumption is $65.40.

  • You take the $65.40 (the amount paid) and divide it by the amount used (604 kilowatt hours).

That comes to 10.83 cents per kilowatt hour. So how much of that is TVA's fuel cost and how much of that is MLGW's rate?

To find that, you multiply TVA's fuel cost adjustment (the fine print below the meter reading on your bill, see below) by the amount used.

The electric portion of the MLGW bill for a Midtown apartment. The rising Tennessee Valley Authority fuel cost adjustment rate on the last line could drive electricity bills higher over the summer.
The electric portion of the MLGW bill for a Midtown apartment. The rising Tennessee Valley Authority fuel cost adjustment rate on the last line could drive electricity bills higher over the summer.

  • The fuel cost adjustment of 2.9 cents multiplied by 604 kilowatt hours means that the TVA fuel cost was $17.56 for that Midtown apartment.

  • That means the fuel cost adjustment accounted for 22% of the apartment's electricity cost last month. And it accounted for 27% of what the apartment paid for usage.

How to reduce your energy usage

MLGW has a list of tips as to how you can reduce energy usage. They include:

  • Set your thermostat to 78 degrees. The utility says each degree below that adds 6% to your cooling costs

  • Run a fan. This makes you feel 5 degrees cooler

  • Shade your sun-facing windows from the heat.

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. 

This article originally appeared on Memphis Commercial Appeal: Here's why your MLGW bill could go up 40% this summer