GLASGOW – The Glasgow Electric Plant Board, after passionate debate and a 3-2 vote in favor of doing so, has entered a new 20-year, rolling contract with the Tennessee Valley Authority, which is its wholesale electric power provider.
The deal means, among other things, that GEPB must provide TVA with 20 years' notice if it wishes to cease the agreement.
That narrow decision came after an identical vote to table discussion of proposals from consultants the GEPB's board chairman, Tag Taylor, had said at last month's meeting they would consider after Mayor Harold Armstrong urged them to hire an independent consultant to gather information about other options and weigh pros and cons for them before making a decision on the TVA contract.
Further, at Monday evening's Glasgow Common Council meeting, a proposed resolution encouraging the hiring of a consultant was presented for a vote. It listed several decisions by TVA “that in retrospect may not have been sound” and major expenses TVA has incurred and stated that a consultant could help determine how much of those things Glasgow customers would end up covering. Some members of the council opposed the resolution, which also provided for the city to pay for a portion of the cost of hiring a consultant, primarily because of the wording that they said was slanted against TVA and/or was out of context. Ultimately, the council approved 7-5 a stripped-down version of the resolution without all the reasoning related to TVA's perceived potential faults and committing the city to paying $50,000 or 50 percent of the cost of a consultant.
The board was first informed of the contract at its August meeting and has held off on a decision as its members sought answers to their questions and gathered more information, including reaching out to other local power companies served by TVA, and discussed what options were feasible or not realistic.
When it came time to discuss the consultant proposals, Taylor immediately made the motion to table it for a later date.
“There was some action taken at last night's city council meeting that I believe to be improper,” Taylor said. “The intent of the Little TVA Act (Kentucky's law that mimics the federal law establishing TVA) is to separate out our decision-making body from that of the body politic. I feel like that was violated last night during the city council meeting, and I feel like it has put some undue influence on a couple of board members that may feel like they don't have the opportunity to vote the way that their conscience allows them to vote, so I'd like a little bit of a cooling-off period.”
Board member D.T. Froedge, said he and board member Libby Pruitt Short, who had been tasked as a committee to review the consultant proposals, hadn't had a chance to meet due to conflicts, but they had looked over them. Short said, “Even though we didn't get to meet face to face, we still communicated.”
Froedge said they looked at making some modifications based on GEPB Superintendent Billy Ray's recommendations, which he said were reasonable.
“I would suggest that tabling it would just be throwing it out and not looking at it at all,” Froedge said.
Taylor, Short and Jeff Harned voted in favor of the tabling; Froedge and Marlin Witcher, the council's representative on the board, voted against it. That was the same split as as on the TVA contract vote, and the general idea of hiring a consultant did find its way into that conversation anyway.
As Taylor noted that they had been reviewing the TVA contract since August, Harned jumped right in with a motion to accept it as presented. Short seconded.
GEPB attorney Ron Hampton checked to ensure that everyone had seen an updated version of the contract that sought to clarify certain aspects but didn't have an substantive changes, and it was placed on the screen for display.
Froedge said they were making a decision that would be affecting boards for the next 20 years on a contract that equates to $500 million.
He said there was no clause for revoking the contract, which wasn't entirely accurate, but there would be significant consequences if the GEPB pulled out early.
“The fact that we would consider this without the possibility of somebody offering something, another look, another option, whatever options there are, whether these rates are good, bad, and the fact is that we are not – we haven't offered to throw out TVA. We have a five-year contract that's not in jeopardy. We're there ...,” Froedge said. “We don't know the economic conditions in 10 years. We don't know who's going to be on the TVA board, whether they go bankrupt; we're stuck with whatever they've got. A five-year contract is a reasonable amount. As a business person, I would take that. There's not a business person in their right mind [who] would take a contract that 20 years without knowing what's down the line. We need to the best possible advice.”
He said they could still always sign it later, but once they sign it, that will remove any potential for negotiation.
“It's the most nonsensical thing that an agency would ever ask a board like us to do ...,” Froedge said. “We're not talking about not doing it; we're talking about postponing it, so we still have the option.”
The same contract has been requested of all the 154 local power companies supplied by TVA, and more than 130 have already agreed to it.
One of the incentives TVA is offering for the contract is a 3.1 percent credit to its kilowatt-hour and kilowatt demand rates to its customers, which would be passed through to the GEPB customers. Froedge contended that's not worth a lot to the average customer.
Ray has said the credit would be worth about $50,000 per month or $12 million over the course of the two decades that would stay in this community as opposed to going to TVA.
Taylor said that, during an earlier closed session, the board had been advised by a guest, “a member of our economic development team,” presumably Ron Bunch, the interim executive director for the Barren County Economic Authority, who joined them during that time and did not stay for the rest of the meeting, of advantages of partnering with TVA and that companies were looking for TVA-affiliated locations to do business.
“You know why?” Taylor asked rhetorically. “Because they're the best.”
Froedge said he's not saying the benefits aren't good; he just had a problem committing that far into the future.
Taylor said the board was advised in the closed session that even the consideration about the possibility of finding another provider could put a current industry recruitment project at risk, and he reminded Froedge that the GEPB's contracts with TVA were for 20 years from 1963 through 1999.
After several more minutes of impassioned debate between primarily Taylor and Froedge with occasional comments from Harned, Short said that while it's true they can't predict what will happen 20 years from now, it is their job to make decisions based on the information they have at this time, and Froedge said, “and we're not going after the information we need to make a decent decision.”
He told Short she was closing her eyes to some things.
“I'm not closing my eyes to anything. My eyes are wide open,” she replied adamantly.
“I think that you're make a horrid mistake for the people of Glasgow,” Froedge said.
Before taking the vote, Taylor apologized on behalf of the “the majority of the citizens in this community,” who believe TVA is a good partner, to Ernie Peterson, Kentucky general manager for customer service for the Tennessee Valley Authority, regarding the “disparaging” remarks made during Monday's council meeting.
In other business:
• Ray reported that TVA had approved the 2020 customer charges, electric rates, etc. with which he had provided the board for its review after some requested changes were made, and he asked for a final nod so he could get customer notification letters prepared to be distributed and make plans to address the city council to inform it of those. The vote was unanimous to move forward with them.
“Those changes that you approved result in a net decrease [in revenue collected by the GEPB]. As usual, I have seen at least one media outlet say, 'They're increasing the rates again.' That, as usual, is wrong. It's a net decrease to the people of Glasgow. There are increases in the [flat] customer charge, but there are corresponding decreases in the kilowatt-hour charge,” Ray said.
He said the tariffs adopted do not reflect the credit from TVA, because at the time they were calculated, the question of whether the contract would be approved still remained unanswered. The changes will take effect Jan. 1, so they will first appear on bills that are distributed in February.
• Ray reported that GEPB would be making a total payment to state and local taxing districts of $412,518 in lieu of taxes. As a municipal utility under TVA, it is required to make those payments, he said.
• The board also had a closed session regarding proposed or pending litigation, and upon emerging, Short made a motion “that we consult with a qualified competent counsel to investigate litigation regarding libel, slander and defamation.” That vote was 4-1, with Froedge casting the vote against it.
• The December board meeting, which would normally fall on Christmas Eve, was moved to Dec. 17.