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A new policy brief from the Howard H. Baker Jr. Center for Public Policy offers insight into the changes facing the electricity industry and five recommendations on how the Tennessee Valley Authority can position itself for the future.

The brief, authored by J. Scott Holladay, a Baker Center Fellow and associate professor of economics, examines both broad trends in the market and how they impact the federally-backed utility.

“This is an effort to step back a little bit and think about what is happening in utilities generally and how TVA specifically can respond to that,” Holladay said. “TVA is already moving this direction, and they have streamlined their rate classes and invested in demand response.”

The report outlines three trends in the electricity sector, what he calls the ‘three Ds’: decarbonization, decentralization, and digitalization.

Decarbonization includes a move toward renewable energy generation, including a growing consumer and business push for alternative fuels. Decentralization is the shift toward separating the electricity generation and transmission aspects of the industry. Digitalization includes the reliance on smart meters to record consumption in real time and allow for utilities to ramp power up and down.

To stay in line with these industry shifts, Holladay recommends TVA continue to consolidate its rate classes so that all customers are charged the same rates in the same place at the same time. They should also adjust rates across time and space to reflect the costs producing electricity.

“It’s less about who is using the electricity, but where and when you’re using it,” Holladay said. “How much electricity costs to generate varies across the time of day and where you are. If you imagine it’s expensive in one part of the state, you want the price to be higher so they use less. Electricity is an expensive resource.”

He also recommends the utility work with its distributors to promote the use of smart meters, which would allow them to see when customers are using their electricity and charge them accordingly.

The full policy brief can be found on the Baker Center website.

The Howard H. Baker Jr. Center for Public Policy is a nonpartisan public policy center that aims to provide policy makers, citizens, scholars and students with the information and skills necessary to work effectively within our political system and to serve our local, state, national, and global communities.

CONTACT:

Megan Boehnke (865-974-3242, mboehnke@utk.edu)