Nashville law firms sue TVA, electric co-ops in state - 4/13/2004

By NAOMI SNYDER Staff Writer

Two Nashville law firms sued all the electric cooperatives in Tennessee and the federal Tennessee Valley Authority yesterday, saying they had conspired to keep rates high by failing to refund money or reduce rates.

''They're keeping money that belongs to their members,'' said Doug Johnston of Barrett, Johnston, and Parsley, one of the law firms involved.

Co-op managers, however, say they are keeping rates, and debt, low to the advantage of their members.

Tennessee cooperatives serve about 800,000 people, more than 400,000 of them in Middle Tennessee. Anyone who pays an electric bill to a co-operative is a part owner of the co-op.

U.S. Rep. Jim Cooper, D-Nashville, began asking the co-operatives about their financing years ago, noting that none of the Tennessee Valley co-operatives were returning surpluses to members, as is normal in other parts of the country.

The co-operatives, which buy their electricity from TVA, have said TVA's contract has forbidden refunds for as long as anyone can remember. The contract instead directs co-operatives to reduce rates.

But the lawsuit says co-operatives have not reduced rates. TVA says the last co-operative to reduce rates did so eight years ago.

Middle Tennessee Electric Membership Corp., the second-largest electric co-op in the nation serving counties including Williamson and Rutherford, last reduced rates in the 1960s.

Cooper is talking with co-ops about possibly refunding some money that has been collected from members over the years. The co-op managers, however, say refunding money would mean higher rates because the co-op would have to borrow money to raise cash.

Middle Tennessee Electric, for example, has paid for almost 70% of its assets and operations with cash. If Middle Tennessee reduced its equity, or the amount members' own, from close to 70% to 40%, it would be more in line with the national average. It could mail out refunds worth $366 on average. If it had to turn around and borrow that money, it would have to raise rates by 1.5%.

''We operate in a way that has historically proven to be of great benefit to our members,'' said Middle Tennessee Electric spokesman Chris Jones. ''Our interest now and always has been what's in the best interest of our members as a whole.''

The Tennessee Electric Cooperative Association has formed a committee to study the issue of giving refunds to member-owners.

''We think we've done a good job of keeping these rates low,'' said the co-op association's general manager, Tom Purkey, yesterday.

The lawsuit, filed in U.S. District Court for Middle Tennessee, is seeking class action status and reimbursement to be determined by the court. The other law firm involved filing the suit is Branstetter, Kilgore, Stranch & Jennings.