Memphis’ antiquated TVA contract keeps community from getting power from the sun

by Tom Hrach, Tennessee Lookout
February 19, 2025

(This story was originally published by The Institute for Public Service Reporting – Memphis.)

Memphis Light Gas and Water is taking some baby steps this year to create its own solar power system, but a major hurdle stands in the way: an antiquated contract with its power supplier.

MLGW’s exclusive power contract with the Tennessee Valley Authority forbids the city-owned utility from getting electricity from anyone but TVA.

Among 153 local power companies served by TVA, 148 have signed 20-year, long-term agreements with TVA that allow them to generate up to 5 percent of their electricity on their own. Memphis is one of the five without the long-term contract, preventing the utility from generating its own electricity. 

“The community needs more energy. The demand is going up. Where are we going to get it? We do not want to burn more fossil fields, so solar is where it can come from,” said Dennis Lynch, Midtown Memphis resident and member of the MLGW citizens advisory committee.

“I could imagine many empty blocks in Memphis covered with solar panels and then people signing up to be members and getting reduced rates for electricity, but even that is not allowed in the current TVA contract.”

MLGW operates under a rolling five-year contract with TVA that dates to December 1984. That contract in Section 2B states, “TVA shall be entitled to serve directly any consumer to whom said resale rate schedules are not applicable.” The contract also states TVA retains the right to provide power to other types of customers such as the federal government and any large user of electricity. The 1984 language prevents MLGW from getting power anywhere other than TVA.

Status of a long term agreement

In 2022, MLGW discussed a 20-year long-term agreement with TVA to provide electricity to Memphis, which would have allowed the creation of its own solar power system. But that long-term agreement was never signed, so the terms of the 1984 agreement remain in place. In May 2023, MLGW CEO Doug McGowen announced that the utility would stick with TVA as its power supplier under the terms of the old contract for now.

Was that a mistake?

Not so, said Stephen Smith, executive director of the Southern Alliance for Clean Energy. That is because committing long-term to TVA means Memphis would likely never be able to get out from under TVA due to the onerous exit clauses in such a contract.

Under the terms of the current contract, MLGW must give TVA a five-year notice if it wants to leave. The long-term contract would have required a 20-year notice, which means it would be decades before Memphis could get out from under TVA.

“MLGW is losing out on clean energy, particularly, solar due to the fact that they are not independent from TVA,” Smith said. “But I do not think that signing a long-term contract would be worth it. Memphis would lose out by agreeing to stay with TVA for so long.”

One reason is that the 5 percent limit TVA places on its long-term customers is miniscule compared to the potential for solar power in West Tennessee, Smith said. 

“MLGW did absolutely the right thing by not signing that long-term contract. Instead, we would like MLGW to start re-negotiating that agreement again and start using the leverage it has to encourage the use of renewable energy,” Smith said.

Baby steps to solar power

At the Oct. 2 MLGW board meeting CEO Doug McGowen outlined the capital improvement projects for 2025. He said the utility is doing what it can to move toward solar power by installing the first-ever battery storage system. 

McGowen has acknowledged MLGW is prevented from creating its own solar power because of the current TVA-MLGW contract.

“We are still committed to that. I want to get the battery storage rolling first,” McGowen said at the Oct. 2 meeting. “We have some architecture and engineering money allocated for solar. We are working with our partners at TVA to determine how to do that in the constraints of our current contract. That remains a priority for us.”

Solar power would be part of what McGowen called “an aggressive expansion of capacity” to provide electricity for Memphis. At the most recent MLGW board meeting on Feb. 5, McGowen noted that the request for proposals for the battery storage would be out soon. But he offered no exact timetable. McGowen has said Memphis needs to expand the ability to provide electricity for economic growth

The best example is the establishment of the xAI facility in south Memphis, which has huge power demands. Bloomberg News reported that new artificial intelligence data centers can be drivers of economic growth for communities, but they have huge power demands. Communities that are prepared to provide increasing amounts of electricity will be the beneficiaries. And part of providing increasing amounts of electricity is that local communities need to be generating their own power instead of just buying it from someone else.

Battery storage is pivotal to plans for solar power because the sun does not shine at night, so the electricity must be generated during the day and then stored for use at other times. But a battery storage system is only the first step toward using the sun to generate electricity. 

Memphis falling behind

Scott Brooks, senior relations specialist for TVA, confirmed via email that Memphis is way in the minority when it comes to developing its own power generation, writing, “Many of our partners are doing solar and community solar.”

Other TVA communities that are generating their own solar power are the Knoxville Utilities Board, BrightRidge (which serves the Tri-Cities area of Tennessee) and the Nashville Electric Service.

A 2023 study done by the Southern Alliance for Clean Energy titled “Solar in the Southeast” confirmed that Memphis was far behind Knoxville and on par with Nashville when it came to using electricity generated by the sun. 

The same study showed that Memphis will be even further behind Knoxville by 2027 if things stay the same with the TVA contract. And Tennessee, which is entirely served by TVA, is miles behind the average utility in Florida, Georgia, South Carolina and North Carolina.

The goal of creating Memphis’s own solar power system is not new. It was part of the Memphis Area’s Climate Action plan written in 2020. That 222-page plan said: “Transforming our energy supply over the next 30 years will need to take an ‘all-of-the-above’ approach, with actions ranging from partnering with TVA to increase renewables in their portfolio, to encouraging and constructing local sources of renewable generation (particularly solar).”

The plan said the city of Memphis and Shelby County would work with TVA to explore changes to the MLGW contract. The report mentions solar power 35 times as a key goal for the community.

Yet more than five years since that report, no progress has been made toward establishing a local solar power system in Memphis.

Some solar power exists

Despite the restriction, solar power is not absent in Memphis. The TVA contract does not prevent companies, individuals or even government entities from putting up solar panels and generating power. The biggest solar project in Shelby County is happening at the Agricenter where thousands of vehicles whiz by five acres of solar panels on Walnut Grove Road.

That project launched in 2012 is generating enough electricity to power 110 homes per year. And it is connected with TVA’s system, showing the potential for solar power in Memphis. Shelby county government also generates electricity with the establishment of its modest collection of solar panels off of Farm Road behind the county code enforcement office.

How can Memphis start maximizing the benefits of solar power?

Citizen action is what is needed to change the situation, said Lynch, a frequent public speaker at MLGW board meetings and member of the West Tennessee Sierra Club.

“Citizens need to better understand what is the story,” Lynch said. “They need to knock on the doors of MLGW and ask what MLGW: What are you doing to allow TVA to allow us to install solar?

Tennessee Lookout is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Tennessee Lookout maintains editorial independence. Contact Editor Holly McCall for questions: info@tennesseelookout.com.

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