TVA to reduce Fuel Cost Adjustment Jan. 1

MTEMC members will see their rates go down by about six percent Jan. 1, as TVA will reduce its Fuel Cost Adjustment.

TVA announced the decrease last week. While the average impact to member bills will be six percent, amounts consumers save will depend on the amount of energy they use because the fuel cost adjustment is a per kilowatt-hour charge. The FCA will decrease from the current 1.8 cents per kilowatt-hour to just more than 1.3 cents per kilowatt-hour.

“This is much needed relief for our members,” said MTEMC President Frank Jennings. “We’ll continue to hope drought conditions across the Tennessee Valley improve and coal prices modify, which could bring more relief.”

TVA cited reduced natural gas prices and lower consumer demand as the primary reasons for the reduction. When demand goes down, that means TVA purchases less power on the open market, which can be very expensive.

“Recent reductions in purchased power and natural gas prices have helped reduce our actual costs and forecast for the second quarter of 2009,” TVA Chief Financial Officer Kim Greene. ”Unfortunately, coal prices remain significantly higher than last year, and sustained drought conditions across the Tennessee Valley have cut TVA’s hydro generation by more than 50 percent, preventing TVA’s fuel costs from dropping further.”

Greene said economic conditions led to a decrease in power sales July through September, which also helped lower the FCA by reducing TVA’s reliance on its most expensive power sources. About 60 percent of TVA’s power supply comes from fossil fuels – primarily coal, along with oil and natural gas. When fuel prices increase, TVA’s cost to produce electricity for the 9 million consumers across the seven-state Valley region increases as well.

Posted on November 17, 2008.

 

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