Understanding the Power Cost Adjustment mechanism: What it means for your electric bill, By Eric Eriksen
As your trusted electric cooperative, we are committed to providing reliable and affordable energy while maintaining transparency in how your bills are calculated. Beginning in October, you will see a new component of your bill identified as “Power Cost Adjustment” (PCA). This mechanism reflects changes in the cost of purchasing wholesale electricity for you. Our biggest expense, wholesale electricity, changes month by month. Let’s explore what PCA is, why it’s necessary and how it impacts your monthly bill.
What is the Power Cost Adjustment?
The Power Cost Adjustment, or PCA, is a mechanism that allows us to adjust your bill based on fluctuations in the cost of purchasing electricity. It ensures that we can recover the actual costs of electricity without implementing a permanent rate increase. Think of it as a way to balance the scales when energy costs rise or fall.
The cost of purchasing electricity on your behalf can vary due to several factors, such as:
Wholesale Formulary Energy Rate: In August 2024, Tri-State, our wholesale energy supplier, received approval to implement a formulary rate design. This was approved by the Federal Energy Regulatory Commission (FERC) to ensure just and reasonable rates that are better aligned with the cost to generate and transmit power.
Weather: Weather varies your energy demand. A wet summer can decrease the demand for irrigation; or a colder winter can increase the demand for heating.
System Losses: Energy lost during transmission and distribution across wires and transformers varies with demand.
How does it work?
Each month, we compare the actual cost of power per kilowatt-hour (kWh) to the base rate set in our pricing structure. If the cost of power is higher than the base rate, a small charge is added to your bill. Conversely, if the cost is lower, you may see a credit applied.
For example:
If the residential base rate is $0.10 per kWh and the actual cost is $0.11 per kWh, the PCA will add $0.01 per kWh to your bill.
If the actual cost drops to $0.09 per kWh, the PCA will credit $0.01 per kWh back to you.
This adjustment ensures fairness by directly reflecting the true cost of energy, rather than locking in rates that might not align with the power market.
Why is the PCA important?
The PCA benefits both the cooperative and its members:
Transparency: It provides a clear view of how energy costs are affecting your bill.
Flexibility: It allows us to adapt to the changing cost of wholesale energy without overcharging or undercharging members.
Fairness: Members only pay for the actual cost of power, ensuring equitable billing.
How can you manage your energy costs?
While the PCA reflects external factors beyond our control, you can take steps to manage your energy usage and keep your bills predictable:
Monitor/Control usage: Use energy-efficient appliances and turn off devices when not in use. Add smart thermostats.
Weatherproof your home: Proper insulation and sealing can reduce heating and cooling costs.
Consider Time-of-Use: If applicable, shift energy-intensive tasks to off-peak hours when rates may be lower.
Energy assessment: Enroll in the Electrify and Save Program to schedule a free energy assessment and learn more about how you can save. We strongly encourage all members to take advantage of this money-saving program.
We’re here for you
At SLVREC, we’re committed to keeping you informed and empowered. The Power Cost Adjustment is just one of the tools we use to ensure fairness and transparency in your billing. If you have any questions or concerns, please don’t hesitate to reach out to our customer service team. We’re always happy to help!
Thank you for being a valued member of our cooperative. Together, we’re powering a brighter future.