By Karl Schledwitz

We, as members of the “$450 Million for Memphis,” a civic-minded group, formed by lifelong Memphians, remind the public that Memphis Light, Gas and Water’s recommendation to remain with Tennessee Valley Authority has not yet been vetted by independent examination.

The only participants involved in the request for proposal were MLGW, its hand-picked consultants, Siemens and GDS Associates, Inc., and TVA, producing what numerous parties consider to be biased information.

This lack of independent analysis has been our complaint since day one. Don’t forget that MLGW actually opposed an RFP and wanted to grant TVA the 20-year contract without competitive bids.

Thankfully, Mayor Strickland prudently agrees that a $20 billion public sector RFP like this should be “audited” before its conclusion. Verification is a public service, particularly in this situation.

His energy consultant, the nationally-recognized firm EnerVision, is expected to submit its analysis to City Hall before year-end, a potential game-changer that MLGW will not acknowledge.

MLGW has known for months that Mayor Strickland ordered EnerVision to examine the RFP, yet wants the MLGW board of directors to vote immediately on its TVA recommendation, after slow-walking the process since 2018.

Why the sudden hurry? Could it be that MLGW executives are concerned that the RFP will not meet reasonable professional standards, and that its new CEO, Doug McGowen — who is not a TVA alum — won’t blindly buy it?

Just as importantly, why would MLGW’s board agree to vote on MLGW’s recommendation without the third-party corroboration from the Mayor’s report’s? Since the Mayor appoints all board members and has just appointed McGowen with an 11-1 Memphis City Council vote, it contradicts McGowen’s stated goal of having MLGW be “aligned more closely with the work of the city of Memphis.”

Shutting the new CEO out of a major decision, particularly after the former CEO abruptly resigned and left town prior to scrutiny of the RFP he knew was coming, raises legitimate credibility questions about the entire process. This is not a vote of confidence.

We will respect the Mayor’s energy report

While we don’t know what EnerVision’s report will say, we are grateful for their independence and qualifications, and we will therefore accept their conclusions. We stand by our belief that independent analysis will disagree with MLGW’s recommendation.

However, on the flipside, if the Mayor’s report says otherwise, we will say we are wrong, eat crow, and be satisfied the process was fair, even if it wasn’t transparent as promised.

We ask MLGW and its board to respect the Mayor’s report

If the Mayor’s report finds major shortcomings with the RFP, we hope that new leadership under the very capable Doug McGowen will act accordingly. It stands to reason that MLGW’s Board would similarly want to act given their oversight role.

Are TVA’s purported ‘savings,’ really savings?

The facts are this: TVA’s “3% savings” aren’t guaranteed, they are linked only to TVA’s “base rate” portion of its wholesale price, and are available only to utilities who sign TVA’s evergreen long-term contract.

It is analogous to an airline offering a 3.1% discount on your luggage fee, and then bragging about it, even as their overall ticket cost skyrockets. Then, if you ever leave the airline’s loyalty program, you must reimburse them for at least 20 years of those “savings.” Since you may have to pay it back, it’s not really savings. A realistic “savings reimbursement” for MLGW would be over $1 billion.

Why we got involved

As lifelong Memphians, the members of $450 Million for Memphis believe that TVA ignores MLGW, its largest customer. Memphis represents 11% of their business yet less than half of 1% of their employees are based here. And we get less than 2% of their capital spending.

MLGW has been neither transparent nor impartial

MLGW finally agreed to a bid process, but required bids to be based only on high-cost scenarios that its first consultant, Siemens Inc. — a major TVA contractor — created in its Integrated Resource Plan study, which still showed over $100 million in annual savings. We opposed bid restrictions, as did the majority of city council, which caused a six-month stalemate after council voted down MLGW’s proposal.

After the March 2021 deep freeze, MLGW attempted to halt the RFP, but was overruled by Mayor Strickland, who then brokered a compromise to get the RFP going again.

This required MLGW to insert language into the RFP components stating: “The RFPs should make it clear that the 3 Portfolios are the desired scenarios, but that any response may include additional proposals of a better way to transmit or generate power.” This includes capital lease structures to avoid MLGW taking on unnecessary debt and was formally authorized by the MLGW board and by city council.

Shortly thereafter we discovered — simply by making the effort to read the documents — that MLGW and GDS did not honor the “additional proposals” compromise for its Transmission or Generation RFPs. Mayor Strickland hired EnerVision to review the complaint and EnerVision also concluded the RFP did not comply.

Apparently, GDS remained silent, which we believe is a commonsense breach of its duty. We are unaware what the MLGW board’s response was. To his credit, Mayor Strickland again required MLGW to rectify this, but MLGW did so via murky language only in the final RFP component, Renewables, forcing bidders to guess what it all meant, which we believe made potential bidders walk away.

To this very day the Generation and Transmission RFPs still do not include the “compromise” language.

Misinformation campaign

TVA throughout the process tried to use scare tactics to make everyone think that reliability was an issue, spending ratepayer money on a public relations campaign — that it refuses to discuss — and at one point hiring up to five lobbyists and two public relations firms to lobby city council.

Yet per the basics of federal energy regulation, the truth is that the MISO (Midcontinent Independent System Operator) is as reliable as TVA. Recent information from the U.S. Department of Energy disclosed that MISO imports about 10% of TVA’s power demand into TVA territory every day, providing evidence that MISO powers a portion of Shelby County already, contrary to what TVA says.

MLGW, its board, and GDS ignored this, even though reliability is supposed to be a core element of the RFP. This inaction is yet another credibility issue for the RFP results.

What we recommend

If the Mayor’s report identifies significant savings by leaving TVA, as have all previous independent reports, or makes basic suggestions from the bids to achieve these savings, it is time to give notice and proceed with an orderly separation.

If the report says there are not savings, we will admit we were wrong. If the report says otherwise, it is time for MLGW to do the same.

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Karl Schledwitz is a Memphis entrepreneur and philanthropist.  He is a co-founder of $450 Million for Memphis which advocates for an electricity supplier in Memphis other than TVA.