When you receive your monthly electric bill, do you look at the individual line items? One line item reflects the “Fuel & Purchase Power” rate, which is adjusted four times a year. The next adjustment will take effect Sept. 1. To better understand why this rate changes, we’re taking this opportunity to explain the details.
The Fuel and Purchase Power, or F&PP, rate is related to 1) the price of fuel for GVEA to generate power, and 2) the cost to purchase power from other utilities. Just like the cost of fuel at the gas pump, the cost of fuel to generate power fluctuates, as does the cost to purchase power. F&PP is a pass-through charge; there are no added costs. Therefore, members are only charged the true cost that GVEA pays to generate and/or purchase power.
To demonstrate how dramatic the fluctuations can be, the F&PP went from 10.965¢ in March to 7.095¢ per kWh in June (a decrease of 35%). This decrease was due primarily to the dramatic decrease in fuel prices. The F&PP effective Sept. 1 through Nov. 30, 2020, has increased from 7.095¢ to 9.614¢ per kWh, an increase of 35%.
The current F&PP includes a true-up of actual data from the prior three-month period (June through August), as well as an estimate for September through November. Let’s explore this a little more.
First, let’s talk about the true up from June through August. F&PP costs were higher than estimated, due to maintenance on Healy Unit 2 and the lack of economy energy due to an outage on the Intertie. Healy Unit 2 was scheduled for a month of maintenance, but the plant required additional work, and maintenance was extended three more weeks. During this same time, the Anchorage-Fairbanks Intertie was also down for maintenance, meaning that we did not have access to power from the other Railbelt utilities or Bradley Lake for three weeks. Since these two sources of low-cost power were not available, power was generated at GVEA’s other plants, which cost more to operate. Ultimately, during June through August, GVEA’s F&PP expenses were about $3 million more than projected. Those costs will be recovered, or trued-up, during September through November.
Second, let’s talk about the estimated costs for September through November. The projected increase in the cost to generate power in coming months is due to planned maintenance. Over the next three months, Healy Unit 1 and Unit 2, which are among our least-expensive sources of power, will both undergo planned maintenance. It is not typical for GVEA to have these two plants undergo maintenance within the same F&PP quarter. However, due to COVID, maintenance for Healy Unit 1, which was planned for last spring, was rescheduled for this fall. Unfortunately, deferring this maintenance is not an option because F&PP rates could be potentially higher during a time of cold weather, when customers consume more power.
While F&PP is a true pass-through expense, and GVEA does not inflate this rate at all, we know that the dramatic fluctuation in price impacts our members. Based on the average residential bill of 600 kWh, the impact of the Sept. 1, 2020, F&PP rate will increase a monthly bill by $15.12.
We want to assure you that GVEA works hard to provide reliable electric service at fair and reasonable prices. GVEA employees are also members. We are also impacted by the price variations and understand that price fluctuations make it difficult to budget. GVEA is exploring ways to stabilize the F&PP rates for our members.