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- MLGW leadership on TVA, the utilities infrastructure and much more.

Tonight on Behind the Headlines.

[intense orchestral music] I'm Eric Barnes with the Daily Memphian, and thanks for joining us.

I am joined tonight by JT Young, President and CEO of MLGW.

JT, thanks for joining us.

- Thank you.

- Along with Mitch Graves, Chairman of the Board of MLGW.

Thanks for being here, Mitch.

- Thank you very much, Eric.

- Along with Bill Dries, reporter with The Daily Memphian.

We'll start with TVA.

We'll also get to some of the recent water issues, and not to rehash it, but to talk about going forward and what went right, what went wrong and what MLGW has learned.

And we'll get into some other issues, obviously cause there's always a lot going on with MLGW.

But the question, JT first to you, that has been on the table here for what, you know time has lost all meaning in the pandemic, but it's a year plus, it seems, that there's been this heated discussion about MLGW looking for another source for electricity than TVA, Tennessee Valley Authority, which I think MLGW has worked with for 80 some years, and MLGW is the biggest customer of TVA.

And it's gone back and forth on whether there would be a study or further studies on whether MLGW should look for other options.

The option that is most frequently mentioned is MISO.

I forgot to write down the name of the acronym, but it's a cooperative electric cooperative that serves much of the Midwest.

It is primarily based in Arkansas.

So with that very quick setup to a very complicated issue, where do you stand, JT, in terms of the idea of, at the very least, getting bids, getting other options on the table, than TVA just so MLGW knows what all its options are?

- Yeah, great.

Thanks Eric.

One of the things you may be aware of is that our board has asked us to put together a resolution, and we'll be presenting this to our board next week, that we'll do just that.

You might recall, back in the fall we had a proposal that we received from a company called GDS to actually go out to the market look at opportunities or prices for other sources and the infrastructure that it would take to get that energy, that electricity to the MLGW service area.

Our board approved that.

The City Council did not.

And so for about the last five or six months or so, we've sort of been in a little bit of limbo.

And so now our board has asked us to move forward.

We're going to take that original proposal with a few of the conditions that you may be familiar with.

Mayor Strickland got engaged and some of the Council members tried to work through some thoughts and some processes of maybe where that could be made a little bit better.

We're working to reshape it, bring it to our board for another look and maybe get it to the Council for another look if that works.

And we will see what happens after that.

So that's kind of where we are in a nutshell that's a high level summary of where we are in a nutshell.

- My impression, and you can correct me if I'm wrong is that you've been somewhat more resistant to looking at other options that you had wanted to table, if not end, this exploration.

The board voted recently three to two, and we'll talk to Mitch about that.

But my sense was that you were a little resistant to at least now and maybe at any point looking for an alternative to TVA, is that fair?

- Well, yeah, there was, you know, as I looked at the options that we had and what I thought from a timing standpoint because of some things going on at the level of the FERC, Federal Energy Regulatory Commission, the recent weather events, and some other thoughts, it seemed to me that it was appropriate to maybe pause that.

I did not necessarily intend for that to mean forever and ever.

I think the recommendation was for now.

- Mitch, to bring you in, you started as board, I guess you joined the board or became board chair in January.

The board voted three to two to go ahead and begin to explore other options.

What was the shape of that debate?

You voted for moving forward, two members voted against.

What was the shape of that debate?

Why, again, I mean the simplistic point of view is, get as many options, get as many bids, look at all your alternatives.

It's a huge decision.

There are people who've talked about as much as $400 $450 million in savings that can be found.

Other people have raised all these risks.

It's a five-year notice.

I mean, this is not a fast thing where we flip a switch literally, no pun intended, and switch, but what was the shape of the debate on the board?

- So Eric, one of the things, yeah, it's a five-year notice to TVA, but longer term, whatever decision we end up making is probably gonna be a 15 to 20 or maybe even 25-year decision.

So the board wants to have all options, and the consensus throughout all the board members, we want to compare apples to apples, and that's been difficult so far.

And that's why the GDS piece was important that we bring in a third party.

That did go to Council and was rejected.

And so, as JT just mentioned, we've been sort of on stall for four, five, six months since that went to the City Council.

The vote the other day, I can tell you again, what we ended up being unanimous on was to send a new resolution back to the City Council, so the board was split.

There were some who felt like, no matter what we do, the Council's gonna reject it.

We've done our best and let's just keep moving forward.

And then the other half of the other two members besides myself, felt like, well, let's get all the answers and then make a decision.

And let's send something back to the Council, ask for their approval, and that's where we are today.

We've got a specially called board meeting in the next few days for JT to present another resolution to us that, if approved, will be taken to the Council's next meeting.

- Alright, let me go to Bill.

- JT, this sounds like it's not an exact copy of the earlier resolution, and Mayor Strickland has talked about his office being involved, primarily, as what he has described as maybe a kind of mediator between the board and the Council.

Is that what you envision in this new resolution that your board's gonna vote on?

- Yeah, as I remember from the latest Council Committee meeting, the Council meeting where that was shared, that was certainly his intent, and the mayor and I have had some conversations, definitely appreciate the engagement and trying to make sure that there are some things that can be brought to the table to resolve any differences.

But I think this resolution that we're putting together we're trying to maintain the spirit of what was intended in the updated resolution brought to the Council last week.

And we're trying to make sure that we don't ignore those issues, but that we bring that to keep the Council engaged and involved, keep them updated and just make sure that we're going through the process in as open a manner as we can, which is what we tried to do from the very, very beginning.

So, we're trying to make sure that we mirror as best we can.

There was a healthy debate, I think, or discussion at the Council last week regarding some of those additional conditions that were proposed.

And so we're trying to take that into consideration as we move forward.

So a lot of moving parts, but we're going to do our best to bring something that everyone can agree on.

- Mitch, to people who haven't sat in on the meetings or been in the meetings, this all sounds pretty simple, but the truth is, while Memphis Light, Gas, and Water is a city-owned utility, it has its own board.

And the way that things work is that the board approves something or does not approve something.

If it approves a resolution like this, let's say, it then goes to the City Council.

So was there a question here about who goes first, the Council or the board?

- No, I, I don't think so.

We understand that, based on the charter of MLGW, the board has a governance authority for this, and it needs to come through us first and then be taken to the City Council for a vote on that.

And their vote is really based on the spending side of that.

So, no I don't think there was any debate on who goes first.

We want to work together through this.

Our goal is to make sure we have the best rates available and the reliability and sustainability for the citizens of Memphis and Shelby County that we serve.

So, I don't think anybody's motives are any different.

We just, we want to, again I think the big deal here is compare apples to apples, and it's just not a rate.

It's just not like you or I going out to shop for a new Honda Accord and going two different lots and getting what those rates are.

You know, in this deal, we've got to figure out, if we go with somebody else, how does the electricity get to us through the transmission which there are questions there about TVA.

JT mentioned that earlier with FERC and them approving TVA to do that.

And then, if we go to the MISO option, we've also got to begin to think about power generation which is a requirement of that.

So, it's not just as simple as getting two different prices.

And I can tell you, the board will not make any move to turn the contract with TVA until we have a full picture of all the expenses related to us.

So we've got a while to go on this, but again, I think the board believes, let's move on through the process and let's get GDS on board and start moving in the direction of getting some answers.

- All right, JT, before I go back to Eric, your pause in this was, it seemed to me, was somewhat motivated by what happened in the February winter storms elsewhere, in Texas namely, and that involved some deregulated power providers there.

And, in fact, MISO, Midcontinent Independent System Operator, who's the most mentioned rival to TVA here, FERC, the Federal Energy Regulatory Commission.

We've got a lot of acronyms today, but FERC is taking a look at how MISO, as well as others, performed in all of that.

Can we get answers to those questions about price spikes and blackouts in Texas?

Can you get assurances on that or answers to that while this RFP process is underway here?

- The great question, and I don't know that we can because we're dependent upon the regulatory authorities that are doing the investigations and the evaluations.

So it's their timing, not ours.

And so one of the things that we have to be mindful of, and our board has to be mindful of, is that as we move through this process, this is part of what was a consideration of mine.

As Mitch said, this is not a real simple thing to do.

And as you think about what did happen in the weather events which was part of my reasoning, the marketplace of MISO, everybody needs to remember MISO is not a TVA.

So MISO is an independent system operator.

It is a marketplace.

And so they were not, MISO was not developed or designed for MLGW's load.

TVA, designed its system for our load, and I do not want to go too far down that path, but I will say that doesn't mean that we could not take service from MISO, it just means that the conditions upon which we would do so necessitate things like you heard Mitch talk about, things like building local generation.

MISO came to the City Council more than once, and they did an assessment and an evaluation, and they have indicated that we would need to have local generation.

And that's mainly for stability of voltage and other things but also to hedge against price spikes when things like last month happen.

So electricity generation, transmission and delivery is not a simple thing.

And so, when we think about making this kind of transition, the events that happen in those marketplaces is significant because what we don't want to have, no contract can deliver electrons, generation delivers electrons.

So what we want to make sure we have is the constant delivery of electricity to customers as Mitch mentioned, so that our customers see that value.

These markets that have been developed do a great job in what they do, but the exposure that we saw from last month must be considered as we move forward and consider maybe making a move into one of those markets.

That's really important.

- Let me stay, and I want to thank Bill for taking the acronyms so I didn't have to, but let's stay with the TVA offer for a second and the last time we had Jeff Lyash, the head of TVA, on the show, and I think it was reported that he was talking about some offers.

I mean, the deal is being made.

I mean, very clearly.

So what TVA had talked about, and I think this was in the fall, was $20 million a year in savings, another $15 million a year in additional savings through efficiencies, potential help with power generation, which could be solar, more economic incentives for businesses and business relocation.

And TVA is already a big player in that.

And then they talked about cleaning up the old Allen plant, the coal plant that's been replaced by the, the natural gas both of which are owned by TVA, unless I'm screwing that up.

So it was quite a big bag of tricks, right?

And maybe I'll go to you, Mitch.

As you sit there and the board chair seat and talk about this being a, yeah, we had a five years notice but it's a 20- to 30-year decision.

Are those incentives attractive, those pieces of the offer, attractive, and have they changed at all as this conversation has gone along with TVA?

- No doubt, Jeff and the TVA team have laid out additional items that, whether it's jobs here in this community, economic support for businesses coming into the community, additional savings, all those definitely come into the decision making.

And some of that is stuff that others can't offer.

You know, it's the incumbent who's already here and has a plant here in Memphis, and a footprint, and economic development in the state of Tennessee, works with our Chamber of Commerce, and the others don't have that.

And so that, no doubt, will enter into our final decision-making.

All things, being equal, you know, the prices or a little bit of difference.

Then you move to reliability, to the additional incentives.

So those will go into the decision-making, but again, it's not something that the others can offer.

So it's a one-of-a-kind sort of deal.

- Let's go, I'll segue, and Bill may come back to some of the questions about TVA, but I want to kind of use this as a segue, JT, to talk about infrastructure and MLGW's infrastructure.

I think right after you got the job a couple of years ago, you were on the show and you were advocating for a rate increase to begin to address capital improvement issues, infrastructure issues with the MLGW system.

And we should just clarify, I know we're saying it, but just to be clear, TVA only provides electricity to MLGW.

You get natural gas from other sources.

Water comes from the aquifer.

This isn't just about TVA when we talk about the services that MLGW supplies.

But you would advocate for a rate increase to I think it was a billion dollar capital campaign.

You can correct me on that.

You didn't quite get the rate increase, which has to go through City Council, that you wanted.

With the water issues we had, and a little bit of electrical as well, but the water issues back in the storm in February were the ones most people noticed, where we had buildings downtown that were losing pressure, that causes a cascade of problems.

We had the boil order for the whole city.

We had just a bunch of infrastructure issues with water.

One, what is the state of our infrastructure?

And two, does it concern you to take on power generation that is more infrastructure that has to be tended to, maintained, and you don't just build it and never have to spend more money on it?

- Yeah, you're mentioning one of the reasons that this is a complicated decision because to the extent that we either contract or take on ownership of additional infrastructure, that certainly becomes another bit of a challenge.

But regarding the water, and first of all, kudos, I mean the Council came through last year.

We got approval to move forward with our infrastructure improvement plan.

The pandemic slowed us down a little bit in terms of getting some things done, but we're trying to move now to get some of those projects in place.

And we did find, we know on the electric side, we have challenges.

We have other challenges in water with regards in particular to the age of many of our water pumping stations and the condition of our wells that get the water out of the aquifer.

That's where we saw a lot of challenges last month in being able to continue to maintain our reservoirs at those facilities.

The water main breaks, while there were many of them, we have about 300 to 400 water main breaks every year, we saw about 160 of them just in that 8 or 10 day period from the weather.

So we had quite a few more, but most of our infrastructure challenges, especially as it pertains to water, is predominantly at our water pumping station locations.

Many of those were built back in the 30's.

We have wells that are well past their useful life that need to be replaced and upgraded, and certainly there's a lot of equipment at those facilities that need to be updated, electronics and other things.

So we're about doing that now, as well as fast as we can, we had a five-year plan.

We're trying to expedite that to help.

And on the electric side we're doing the same thing, trying to move forward.

The board and Council have approved, recently, an overhead contract to help us with things like distribution automation, getting that installed so that customer outages will be minimized.

So a number of things in play as we move forward this year in the next couple of three years to get things better on an infrastructure side - Before I go back to Bill, do you feel if that storm happened again with that level of freezing and all those circumstances happen again, five years from now, or, you know whenever the capital improvement plan has been implemented, do you feel confident that we wouldn't have had those water issues or could we have had a whole set of other issues?

- Yeah, good question.

Well, just remember a lot of the issues that we had, we were somewhat surprised that we saw a number of service line breaks on the side that were customer service lines bringing water to the customer location as well as some of the fire suppression lines.

So the water main breaks were a big deal, but we saw a lot of water loss through other means.

So to answer your question there will likely still be challenges even after we're done.

We think they'd be mitigated because we would probably be in better shape at our pumping stations to be able to at least try to maintain the water production at that level.

- Alright, let me go back to Bill.

- Mitch, let me change topics here again.

Is it important that the Memphis Light, Gas, and Water board take a position one way or the other on the Byhalia Connection Pipeline?

- You know, as a lifelong citizen of Memphis and understanding one of our most valuable assets is the aquifer here, everybody's concerned about anything that may have an impact to that.

And we've gotten at the last probably four or five board meetings, numerous comments to the board about, you know, we can't let this happen.

Obviously, again, the board, JT, there's nobody at MLGW that doesn't want to protect the aquifer.

I mean, that is critical to us.

How we go about doing that in the right manner and legally is something that we defer to in-house counsel at MLGW to direct us on, but make no mistakes, the board 100%, nobody wants anything that threatens our water supply here in Memphis.

- JT, I take it this, like all other questions at Memphis Light, Gas, and Water, does involve some degree of technical issues too.

- Certainly, and to Mitch's point, we are certainly in lockstep on that with regards to the protection of the aquifer.

I do wanna remind everyone, it's important to understand that the aquifer is a multi-state resource.

It doesn't just sit under Shelby County.

MLGW does not own the aquifer nor do we control what goes above it.

Certainly not even within Shelby County let alone other states, but to the degree that we can, and you may be familiar with the routing issue that's come up about this pipeline, that's where we're of course concerned and have been working.

We, in fact, met Friday, our team met with the Southern Environmental Law Center to get more information and to find out more about the concerns around this, and at the end of the day, to the extent that we can't absolutely keep it from going over the aquifer in our community, making sure that all the safeguards are there to mitigate any potential adverse impact of any kind of failure.

Just to also make sure folks understand there are multiple pipelines that traverse the aquifer in Shelby County and elsewhere.

But we certainly want to make sure that we take the responsible position on this issue as well.

- JT, just with a couple of minutes left, you know this pandemic has been obviously an economic disaster for many, many people.

And particularly those who are already maybe on the edge or in jobs that were tourism and hospitality and such, you were faced with, I think I have the number right, MLGW had about 17,000 households and businesses that were faced with cutoff.

I believe you, you delayed that, through the pandemic.

Where does that stand now and how do you balance that?

I mean, on the one hand, you cut people off, and that's no good.

It's always a challenge for the utility.

But on the other hand, you all are, in a sense, a business and people have to pay their bills.

What is the balancing act there, and how do you move forward with what's such a big number of unpaid bills?

- Yeah, just to be clear, during the pandemic we actually had about over 32,000 customers that were subject for disconnect.

We suspended disconnects for almost six months, you may recall, and offered some additional extensions on repayments for bills over as many as twelve months with paying down twenty-five percent.

So our, our folks have been doing a great job working with customers.

Now that number sits around 2,000 customers, and that's about where we typically hover, anywhere from 1,500 to 2,000 customers at any given time, so we've seen a lot of great response.

Customers have signed up for the extension for repayment of bill indebtedness, and our team has been working, and we've not stopped.

We've got other things that we've been working with our customers to deliver, to help them through this time, including things like a power pivot, which is an online program that we've been doing with our business customers to connect them to resources during this pandemic to help them stay profitable.

So our team has been working on a lot of different things to help our customers during these challenging times - Very briefly is the message to customers, if you're behind on your bill, don't hide but call and you will work with them.

- Absolutely.

- Okay - That's clear.

Please don't wait, and just call us and we can work with you.

We've got folks, you may have to call a couple of times, but just call us and we will certainly work with you to help you with that.

- Alright.

Well, that is all the time we have this week.

Remember you can get past episodes of the show on the WKNO website at wkno.org or you can download the full podcast of the show from The Daily Memphian site or wherever you get your podcasts.

Thanks, and we'll see you next week.

[intense orchestral music] [acoustic guitar chords]