TVA Fuel Cost Adjustment
What is a fuel cost adjustment?
How does it affect member bills?
How does it work and how is it calculated?
Do any other utilities use this method to offset these fluctuating prices?
What have been the changes to the fuel cost adjustment charges since January 2007?
Does "fuel" refer to gasoline?
What is a fuel cost adjustment?
It is the mechanism TVA uses to help recover largely uncontrollable fuel and purchased power costs. A variety of factors affect these costs, including weather and global supply and demand issues.
How does it affect member bills?
The FCA, which started Oct. 1, 2006, appears as a separate line item on member bills. It adjusts up or down monthly (prior to October of 2009, it was adjusted quarterly) depending upon global shifts in fuel costs, such as coal and natural gas.
How does it work and how is it calculated?
The FCA calculation works by capturing the difference between the amount that TVA forecasts to pay for fuel and the amount that is collected through rates. This formula has two main components: the first is a forecast of anticipated fuel and purchased power costs; the second is a reconciliation of any fuel costs TVA under or over collected. The FCA can be a charge or a credit depending on these differences. It is included on consumers’ bills as a per kilowatt-hour charge or credit.
If the FCA is to be used to help TVA offset these costs, why is the money collected on Middle Tennessee Electric bills?
Middle Tennessee Electric distributes the power TVA produces. In fact, MTEMC operates on about 18 cents of every dollar that comes into the cooperative, with the remaining 82 cents going back to TVA to pay for the power MTEMC distributes. The FCA will also go back to TVA to help them counter the fluctuating market prices.
What is purchased power?
Purchased power is electricity TVA buys on the open market when it cannot produce adequate power to meet customer demand or when it can be purchased cheaper than TVA can produce it.
Do any other utilities use this method to offset these fluctuating prices?
Yes. Most utilities across the nation use similar mechanisms to adjust their rates. Fuel adjustments have been used for quite some time across the country to help the utility industry better align cash flow with fluctuations in fuel and purchased energy costs. TVA actually had a monthly fuel expense adjustment in the mid-1970s.
What have been the changes to the fuel cost adjustment charges since January 2007?
Jan. 2007 - Started as an increase of one hundredth of a cent per kilowatt hour, or (.010 cents).
April 2007 - Increased to .087 cents.
July 2007 - Increased to .091 cents.
Oct. 2007 - Increased to .450 cents.
Jan. 2008 - Decreased to .278 cents.
April 2008 - Increased to .572 cents.
July 2008 - Increased to .714 cents.
October 2008 - Increased to 1.88 cents.
January 2009 - Decreased to 1.383 cents.
April 2009 - Decreased to .843 cents.
July 2009 - Decreased to .548 cents.
October 2009 - Decreased to -0.219 cents.
November 2009 - Decreased to -0.322 cents.
December 2009 - Decreased to -0.689 cents.
January 2010 - Decreased to -0.832 cents.
February 2010 - Decreased to -0.896 cents.
March 2010 - Increased to -0.575 cents.
April 2010 - Increased to -0.201 cents.
May 2010 - Increased to -0.135 cents.
June 2010 - Increased to .206 cents
July 2010 - Increased to .42 cents
August 2010 - Increased to .529 cents
September 2010 - Increased to .686 cents
October 2010 - Increased to 1.173 cents
November 2010 - Decreased to .765 cents
December 2010 - Decreased to .496 cents
January 2011 - Increased to .571 cents
February 2011 - Decreased to .454 cents
March 2011 - Increased to .638 cents
April 2011 - Decreased to .547 cents
May 2011 - Decreased to .516 cents
June 2011 - Increased to .536 cents
July 2011 - Increased to .872 cents
August 2011 - Increased to .927 cents
September 2011 - Decreased to .846 cents
October 2011 - Decreased to .501 cents
November 2011 - Decreased to .446 cents
December 2011- Increased to .654 cents
January 2012 - Decreased to .416 cents
February 2012 - Decreased to .151 cents
March 2012 - Decreased to .106 cents
April 2012 - Increased to .325 cents
May 2012 - Increased to .479 cents
June 2012 - Increased to .533 cents
July 2012 - Increased to .665 cents
August 2012 - Decreased to .454 cents
September 2012 - Increased to .593 cents
October 2012 - Increased to .703 cents
November 2012 - Increased to .810 cents
December 2012 - Increased to .878 cents
January 2013 - Decreased to .644 cents
February 2013 - Decreased to .345 cents
March 2013 - Decreased to .204 cents
April 2013 - Increased to .395 cents
May 2013 - Increased to .510 cents
Does "fuel" refer to gasoline?
This is not about recouping increased gasoline charges for TVA vehicles. The fuel costs this adjustment addresses are the fuels TVA uses to generate electricity, which are primarily coal and natural gas. The prices of both coal and natural gas have grown increasingly volatile. Additionally, when TVA cannot generate enough electricity to supply the power demand of Valley customers, it has to purchase electricity on the open market. That is necessary but expensive, and the associated costs can be recovered through the Fuel Cost Adjustment.
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