Historic drought conditions impact fuel cost adjustment in October
Historic drought conditions across the Tennessee Valley during the past eight months have cut TVA’s least expensive generation resource, hydropower, by more than 40 percent. The period of January through August is among the driest on record in 118 years.
The drought is the key reason for the increase in the fuel cost adjustment (FCA) effective Oct. 1, which TVA announced in mid-August. The October adjustment in rates allows TVA to recover higher-than-anticipated fuel and purchased-power costs this past spring that were related to drought conditions, and it also reflects continued drought impacts that are expected throughout the fall.
The FCA for the three-month period of October through December is slightly more than four-tenths of a cent per kilowatt-hour, or 0.432 cents. The impact will vary across the Valley, but residential consumers can expect an increase ranging from about $3 to $6 in their monthly bills.
“Extremely dry conditions across the Tennessee Valley this year have reduced our hydro generation by more than 40 percent, driving our fuel and purchased power costs higher than we planned,” said TVA President and CEO Tom Kilgore. “We are working hard to manage our resources and costs during these extraordinary conditions, but there is no way for us to avoid buying more power to offset the significant loss of hydro production.”
The FCA is a routine quarterly rate adjustment that TVA uses to help manage the volatility of fuel and purchased power costs. It allows TVA to reconcile its forecasts for fuel and purchased power costs with the actual costs.
The adjustment is part of consumer power bills and can be a charge or a credit, depending on quarterly increases or decreases in fuel and purchased power costs. A variety of factors, which TVA cannot control, affect fuel and purchased power costs, including the weather and changes in market prices for various fuels. Many utilities, including most of those neighboring TVA’s service area, use similar mechanisms to adjust their rates.
Kilgore said the current situation illustrates a critical need for a comprehensive approach to meet the growing power demand in the Valley.
“Energy efficiency and conservation play a key role in that effort,” he said. “Consumers can help manage future electric bills by taking a few simple steps to improve energy conservation in their homes.”
The time of day that electricity is used has a significant impact on the FCA amount consumers will see on their electric bills. TVA’s costs to produce power are highest between the hours of 2 p.m. and 8 p.m., when electricity demand is typically greatest.
A few cost-saving steps Valley residents can take to help improve energy efficiency in their homes include:
- Turn up cooling-system thermostats to 78 degrees. Raise the thermostat even more when no one is home.
- Avoid running dishwashers, washing machines and electric clothes dryers between the hours of 2 p.m. and 8 p.m.
- Keep curtains closed on the south and west sides of the house during the day.
- Use a microwave for cooking instead of a stove burner or oven.
- Use the “sleep mode” on computers.
- Make sure your air-conditioner filter is changed regularly.