KNOXVILLE, Tenn. (AP) - The Tennessee Valley Authority's largest electric rate increase in more than three decades takes effect Wednesday as thousands of consumers already are struggling to pay their power bills and avoid service cutoffs.
A 20 percent rate hike from the nation's largest public utility is expected to add $15.80 to $19.80 a month to the average residential bill. It's TVA's biggest rate boost since 1974 and its second this year.
The hike takes effect in a week of alarming financial news, with the biggest one-day point drop in Wall Street history and the failure of a federal bailout plan that President Bush pitched as essential to steady the struggling economy.
Consumers are worried about how they'll pay the higher bills when other basics such as gas and groceries are costing more, too. Homeowner John Brummett, who works in Nashville's public schools, said his bill has been steadily increasing this year already, and he's worried about another hike with "everything else going up as well."
"I put in new windows and sealed everything. It helped a little but not much," said Brummett, 38. "I've done about all I can do."
Nearly all of TVA's 159 distributors in Tennessee, Alabama, Mississippi, Kentucky, Georgia, North Carolina and Virginia are expected to pass the higher rates on to their customers - factories, businesses and some 8.8 million residents.
The electric rate increase was blamed on skyrocketing costs for coal and natural gas to fuel TVA's power plants and a three-year drought that has hurt TVA's hydroelectric dams, the agency's cheapest source of electricity.
The higher rates come as major distributors in Tennessee are seeing more utility bills going unpaid. Some are responding with pumped-up energy conservation education programs and payment assistance intervention.
Michelle Strain, 35, of Nashville, applied for payment help in February and found a two- or three-month waiting list. She had to borrow money from family and friends to pay her bills.
"You can see times are hard, and everybody's not getting the assistance they need," Strain said.
Before the hike even took hold, utilities were cutting off service more frequently because of unpaid bills. In Memphis, TVA's largest distributor disconnected 69,743 residential customers for nonpayment between January and the end of August. That's 19,481 more homes than the same period a year ago, a 38 percent increase.
Past-due accounts at Memphis Light Gas and Water reached $15.8 million for all services in just the first eight months of the year, compared with $14.8 million in all of 2007.
"It is definitely going to put an additional hardship on our customers and maybe lead to more disconnections for us," MLGW spokesman Chris Stanley said of the fallout from the TVA rate hike on Memphis's 429,000 electric customers.
"We have definitely seen an impact with the economy even before the rate increase was announced," said spokeswoman Laurie Parker at 351,000-customer Nashville Electric Service, where some 60,000 customers are now at least a month behind on their power bills. "I am sure that will not make it any better."
The capital city distributor disconnected 16,465 customers since May - up more than 4,600 - compared with the same period a year ago. "The increase in 2008 is slightly skewed," Parker said, because NES held back on cutoffs for about three weeks in August 2007 during a heat wave.
Chattanooga's Electric Power Board, with 163,000 customers, said it has issued 73,533 disconnection orders this year, up about 2 percent. The average delinquent bill has grown 17 percent - from $152.35 per customer to $178.94. And the number of "promise-to-pay arrangements" to help these customers has risen nearly 11 percent to 137,771.
The Knoxville Utilities Board, which has 183,000 electric customers, said past-due bills are up about 10 percent compared with a year ago.
At the largely self-regulated TVA, spokesman Gil Francis acknowledged that rising fuel costs driving rate hikes and adding pressure to consumers are "a national issue across the board."