Power Update

"Rate Increase Effective April 1, 2008"

TVA recently announced a 7% increase in wholesale electric rates. After carefully studying our financial position, MUS finds it necessary to adjust the overall electric rate increase to 9.9% effective April 1, 2008. In addition, TVA will increase their Fuel Adjustment Charge by 4% for the period April 1 through June 30. This FCA charge adjusts each quarter depending on how fuel costs affect generation.

MUS customers will pay about $18 more, on average, for their electricity. Based on a usage of 1500 kilowatt-hours of electricity a month, the average bill will go from $112 to $130. Of that increase, around $14 is from TVA rate increases and $4 from the MUS part of the increase. Actual billing amounts will vary depending upon individual usage.

Passing through the TVA increases is a necessity since more than 85 percent of our revenues go to buy TVA power. The MUS Board has approved an additional 2.9% increase to cover the costs of inflationary pressures resulting from significant increases in fuel, steel, copper, aluminum, transformers and poles. MUS also must fund several major infrastructure projects in the near future. This is the first MUS rate increase since 1997. We operate not for profit but must have revenues to keep the system functional and break even. We regret having to increase rates, but we have not seen inflationary pressures like this in our history.

We exist solely to serve our customers so raising rates is not something we take lightly. TVA performed a cost of service study and a financial analysis on the MUS system, and these studies indicated we should increase rates. Taken with the TVA increase, this is a significant increase for our customers. It’s our challenge to work efficiently in the most volatile energy sector ever seen.

MUS is proud to have used operational efficiencies to limit rate increases. Recent statistics show that MUS electric rates were 9th lowest of 87 distributors in Tennessee. We are 9th lowest of 62 municipal electric systems and lower that all 25 cooperatives. Our rates are 17.3% lower than the average US municipal and 8.3% lower than the average Tennessee municipal.

MUS will make every effort to offer cost saving ideas to our customer to offset the increase in rates. Through TVA, we are offering free residential energy audits and in response TVA will provide customers with an energy efficiency kit to help decrease usage. For instance, changing out one 100W incandescent light bulb to the equivalent Compact Fluorescent Light can save almost $1 per month on the electric bill.

Strategic Plan
TVA has announced in late 2007 its strategic plan for the next five years.  The major points to address load growth are (1) adding on nuclear unit with 1250MW of generation, and (2) decreasing demand equivalent to one nuclear unit through energy efficiency and load management.  The second point will be pushed upon distributors through new rate structures in the next several years including time of day and seasonal energy rates.  MUS will not remain stagnet and be caught by surprise.  Therefore, MUS has plans over the next three years to implement automatic meter reading whereby new rate structures can be easily programmed and billed to individual customers.

Our power system has also experienced growth in the west and east parts of the system.  To alleviate over loading and retain flexibility, MUS will pursue major projects to add one new substation and modify another.  Over the past year, we have increased right-of-way maintenance (tree trimming) and are close to being back on schedule.  We have also started inspection and maintenance of our overhead switching devices.

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