A Smarter Electric Company

The Electric Power Board recently came under fire for spending $32,000 on the publication of its 2008 Annual Report. The high cost was due in part to pop-up inserts of service trucks and computers alongside the typical bevy of 2D bar graphs and pie charts detailing the power provider’s fiscal performance throughout 2007.

To some, it might seem strange that a plain old power company would put so much glitter and pizzazz into the presentation of a boring financial document. But EPB is no longer the antiquated, Tennessee Electric Power Company heir-apparent of the last 60 years. With the advent of fiber infrastructure and a burgeoning Telecom wing, the company is transitioning into a 21st century Smart Utility, laying the groundwork for intelligent electric and telecommunication service in the Chattanooga area.

A key component of any clean energy discussion lies in the role of fiber optics to improve the transmission and distribution of electricity. Al Gore, creator of the internet & global warming, wrote about the need for fiber optic Smart Grid infrastructure in a NYT op-ed last week. Lucky for you, EPB is rolling out the infrastructure next year, well ahead of the national curve.

Above all the talk of Fiber to the Home (FTTH), EPB has not abandoned its core responsibilities as a publicly owned electric utility. Danna Bailey Cannon, VP Corporate Communications, points out, “We are still an agency of the City of Chattanooga and still distribute TVA power. But we are also expanding our offerings to include those delivered over fiber optics, which we believe are going to be critical in the future much like electric power is now.”

As the utility looks to new challenges and opportunities, it’s also looking for new ways to sell itself to bond rating agencies,

“When we build new substations, add fiber optics to develop our Smart Grid, and make other improvements, we borrow money from the bond market. It is also important to have a strong rating, and our financials along with the presentation of them are an important piece of that equation.”

While revenue fell between 2004 and 2005, EPB has shown consistent growth in the last 3 years. Chief Financial Officer, Greg Eaves, explains some of the ups and downs as well as the correlation to TVA rate increases,

“In fiscal year 2004, TVA began pushing large rate increases to its distributors that in turn had to be passed on to the customers,” but he notes that EPB did not raise its own rates for 10 years.

“EPB had its own increase of 4.0% that was implemented in July 2007. Prior to that, our last rate increase was in 1997. Our philosophy is to operate for a number of years between rate increases, and as we approach a need for another rate increase, net operating income is at a lower level.”

Last week, TVA announced that it will lower rates by 6% in January, a monthly savings of $4 to $8 per family. But electric rates remain 34% higher than they were a year ago in the Tennessee Valley, largely due to the rising cost of coal and natural gas (64% of TVA’s power profile). “For the foreseeable future,” predicts Cannon, “the cost for all energy is going to continue to increase.”

With greater demand in commodity markets, customers can look forward to higher prices when they turn their lights on. Coupled with several energy conservation initiatives, fiber will play a greater role in developing “pilot programs to provide customers more pricing options — like a ‘time of use’ product that gives customers the opportunity to shift the time of day when they use their power to get a better rate.” For example, you can run your dishwasher and dryer, or charge your computer at night when grid demand is down, and do so at a cheaper rate.

Despite some local dissent around the pop-ups in the report, Chattanoogans can take comfort that they still pay less for electricity than most of the country — even with the rate increases during the last year.

Meanwhile, EPB remains committed to its new business strategy and its unconventional marketing approach. Cannon concludes, “We do a lot of innovative things as a company, and we also think it is important to showcase our innovative side with communications…there are lots of things we do differently than other utilities. Some better — some need improvement, But we definitely have an appreciation for unconventional communications, and in this case, we caught a little flack for it.”