The Fuel and Purchased Power (F&PP) rate is an important component on GVEA members’ bills. Check out the FAQ’s below to learn about how the rate is calculated and why it fluctuates, including factors like the cost of fuel, generation maintenance and challenges in securing economy energy.
What is Fuel & Purchased Power?
Fuel and Purchased Power FAQs
The F&PP rate is a component on a member’s bill and is applied based on kilowatt-hour (kWh) usage. The F&PP rate is determined by the cost GVEA incurs to generate power to meet the needs of our members, based on fuel prices, generating units and our ability to purchase power from other local and southcentral utilities and/or entities.
The calculation is adjusted quarterly and includes two components: (1) what we project will be our cost of power over the next quarter, and (2) a true-up of any over or under collections from the previous quarter (i.e. the difference between what we projected the previous quarter and what actually occurred). The F&PP rate is a pass-through of GVEA’s actual fuel and purchased power costs. There is no markup on this charge.
Just like gas prices at the pump when you fill up your vehicle, the F&PP rate is impacted based on the price of fuel. Unlike the price of natural gas in southcentral Alaska, GVEA’s price for fuel can be unpredictable and susceptible to changing fuel market conditions. There are also other factors that contribute to fluctuations in the F&PP rate, such as unexpected outages and shifting availability of power to purchase. All of these have an impact on the calculation of the F&PP rate.
Like other regulated electric utilities, GVEA is required by its governing body, the Regulatory Commission of Alaska to update its F&PP on a quarterly basis.
GVEA follows the same Regulatory Commission of Alaska (RCA)-approved methodology every quarter to calculate the F&PP rate. The projected rate is then filed with the RCA. Under the RCA’s regulations, the F&PP rate change takes effect immediately upon filing with the RCA, however, the rate is subject to the RCA’s subsequent review, adjustment and approval.
GVEA’s Fuel and Purchased Power rate, which is updated quarterly and reflects the cost to generate and purchase power, decreased on September 1, from 13.731¢ to 13.124¢ per kilowatt hour. This rate will be in effect through November 30.
The decrease can be attributed to generation sources running as projected and a smaller load resulting in less fossil fuel consumption in the prior quarter. Additionally, fuel prices are projected to remain stable during the upcoming quarter.
The Fuel and Purchased Power rate is a straight pass-through charge. GVEA’s members are only charged the actual cost to generate and purchase power, there is no mark-up. This charge is an estimate of what GVEA anticipates will be its costs over the next three months to generate and purchase the energy necessary to meet the electrical needs of its members and a true up of any over-collected or under-collected amounts from the prior quarter.
GVEA understands that any rate change has an impact on members and businesses. The fluctuations in GVEA’s cost of power underscores the necessity that GVEA continues to aggressively pursue, and secure lower cost reliable energy to replace underperforming generation units and reduce GVEA’s reliance on higher cost generation.