Construction of a new UTM power facility, built with intentions of saving the university hundreds of thousands of dollars annually, will take about twice as long to pay off than first calculated, and produce significantly less energy cost savings than originally proposed.

That’s according to UTM Vice Chancellor for Finance and Administration Al Hooten. The $4.4-million power generation facility, located on UT Farms, is presently costing the school money because of the Tennessee Valley Authority’s discontinuation of their originally proposed discounted variable power interruptible (VPI) rate, which they would have given to the university as an incentive for building the generator.

But now, the VPI is gone, leaving UTM—as well as other Tennessee universities—wondering where they’ll make up the difference. “Like UTM, many universities and larger businesses are being affected by the discontinuance of the VPI rate—the largest ones being Tennessee Tech, Middle Tennessee State and Tyson Foods,” Hooten said.

“TVA has offered this discounted rate to large businesses for many years, and within the past few years has begun offering the same rate to universities. Because of a rise in the cost of natural gas, TVA services have become more in demand, and because of the high demand, they unexpectedly discontinued the VPI rate.”

UTM first received notification from the TVA July 28 that the first contract would be canceled. The terms of the original contract were based on the VPI rate, offered with 72 hours per month that TVA could pull UTM off of the Weakley County power grid or UTM could pull itself off—granted rates were high enough that the generator could produce power cheaper than power could be bought from the county plant. Hooten said within the last 30 days, UTM has signed a new three-way contract with TVA, which is now in the process of being routed to UT Knoxville. The terms of the new contract are based on TVA’s newly proposed fixed price interruptible (FPI) rate with the 72-hour deal still standing.

Still, that’s not enough to make up the significant savings promised to UTM.

If TVA had not discontinued the originally proposed rate, the university expected to see savings of up to $600,000 per year in energy costs, according to Tim Nipp, director of the UTM Physical Plant.

“We’ll only be saving approximately $200,000 per year in energy costs with the new [FPI] rate that we’re going to,” Nipp said.

However, according to a UTM electric cost spreadsheet, from December 2005 through July 2006, UTM only saved an average of $20,000 per month on the new FPI rate in comparison to the firm price rate, which is what Martin city residents pay for regularly priced, undiscounted energy, and what UTM rates were based on before having the generators built and contracting with TVA. With TVA’s original VPI rate, UTM had anticipated saving about $45,000 to $60,000 per month before the discounted rate was discontinued.

UTM Chancellor Nick Dunagan said, “I’m a disappointed camper,” (regarding the TVA rate increases) during a recent interview with Nashville newspaper, The Tennessean. In another interview conducted by the Nashville newspaper regarding the same issue, Jerry Preston, executive director of facilities for the Tennessee Board of Regents, which oversees the MTSU and Tennessee Tech, said the rate change had “really put a considerable financial stain [on the schools].” The article stated because of the rate increase, MTSU and Tennessee Tech’s new generators would eventually cost the schools about $4 million dollars over the next 15 years.

But Nipp says the power facility is still saving UTM a fair amount of money.

“During the hottest days in August 2006, UTM saved approximately $3,000 by producing its own power. We went off on the peak rate hours, and produced energy cheaper than it could be bought from Weakley County Electric,” Nipp said.

According to Nipp, energy rates fluctuate hourly. Therefore, UTM also monitors power rates hourly to determine the most cost-effective times to run the generator.

Nipp also said an additional benefit of using the generator is the university is unaware of the many local power outages because the generator is used during those times. “We have power when the rest of the area doesn’t,” Nipp said.

The power facility is connected to all buildings owned by UTM, including dorms, with exception of the UTM steam plants because Weakley County Electric experienced maintenance problems hooking the building up to the facility. University Courts and Grove Apartments also are not connected to the facility because they are individually metered; residents pay for their own electric services. Hooten said UTM will continue working with TVA in hopes of getting the best rates possible. Hooten also said in the future it may be possible for the UTM generators to produce power for commercial sale.

The UTM power facility, containing four, two-megawatt generators, has built-in classrooms in which business, agriculture and engineering classes are held. Hooten said the equipment in the facility is expected to function properly for 30 years, but the anticipated 10-year repayment of construction debt will now most likely take at least 20 years.

“The project is being funded with bonds to be repaid from utility savings,” Hooten said.

Except now, it seems as if repaying those bonds could take longer than anyone at UTM could have projected.