TVA reduction to Fuel Cost Adjustment starts Jan. 1

MTEMC members will see their rates go down about six percent when they get their bills in January, as TVA has reduced its Fuel Cost Adjustment.

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 decreased from the previous 1.88 cents per kilowatt-hour to 1.383 cents per kilowatt-hour.

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 increases as well.

Posted on December 31, 2008.

 

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