Judge denies TVA move to dismiss lawsuit over 'never-ending' contracts

A federal judge is allowing a lawsuit by environmental groups against the Tennessee Valley Authority over contracts with local power companies to proceed.

The Aug. 12 ruling by U.S. District Judge Thomas Parker denied a motion by TVA to dismiss the case. Memphis, Tenn.-based Protect Our Aquifer, Alabama Center for Sustainable Energy and Appalachian Voices, has accused TVA of violating federal law through its contracts. (Protect Our Aquifer, Alabama Center for Sustainable Energy, and Appalachian Voices v. Tennessee Valley Authority No. 2:20-cv-02615-TLP-atc)

The environmental groups argue the auto-renewing, 20-year "never-ending" contracts TVA offered local power companies breach the TVA Act of 1933, the federal policy governing the power authority which prohibits contracts lasting longer than 20 years. The contracts automatically renew and require 20-years' notice to be terminated. According to the environmental groups, the length of the contracts potentially allows TVA to delay a clean energy transition and slow or prevent carbon emission reductions.

TVA argued the contracts do not "limit" its "ability to acquire energy from renewable sources in the future," according to the order.

"The court recognizes that TVA puts forth compelling arguments that may prevail in the end," Parker wrote. "But this is a motion to dismiss. And plaintiffs' burden to show standing will increase at each successive stage of litigation."

The groups allege in the lawsuit that TVA is using its long-term agreements with local power companies to "insulate TVA from competition — including local distributors' consideration of alternative, renewable energy sources."

At least 142 local power companies have signed the agreements with TVA, according to the court opinion, and the environmental groups accused the power authority of using a "carrot-and-stick" approach by providing wholesale credits to distributors that sign the contracts, but not for companies that decline, creating "favored status" for some. The groups are asking the court to declare the contract term invalid or reform the contract provision and issue an injunction "forbidding TVA from entering into additional perpetual contracts."

TVA, meanwhile, argued that the contracts "provide greater flexibility for local distributors to generate a portion of their own power from renewable sources," calling 3% to 5% caps "'flexibility agreements' instead of caps," Parker wrote.