Golden Valley Electric Association’s (GVEA) Fuel and Purchased Power, known as F&PP rate for the three-month period, March 1 through May 31, increased approximately 4.8 cents to $0.16629 per kilowatt-hour. This results in an increase to members’ monthly bills with residential members seeing an increase of roughly $29 for the quarter, based on an average use of 600 kWh per month.
GVEA is a cooperative, so it is important that every member-owner understands how their bill is calculated and what factors into any rate increases or decreases. The F&PP rate is recalculated quarterly, more often than any other rate on members’ bills. It can also fluctuate heavily, with members sometimes seeing large increases or decreases. The frequency of these rate changes helps ensure that members are timely charged or refunded for costs tied to fuel and power purchase expenses.
To help ensure members better understand this rate, GVEA has compiled some of the most frequently asked questions about the F&PP rate, both generally and more specifically for this quarter. Read on to learn more.
Do you have a question not answered here? Please give us a call at (907) 452-1151.
What is the F&PP Rate?
The F&PP rate is a component of a member’s bill and is applied based on kilowatt-hour use. 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.
How is the F&PP Rate Calculated?
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.
What Are the Key Drivers for the March 1, 2024, Increase?
For the rate effective March 1 through May 31, the cost of fuel, scheduled generation unit maintenance, and the inability to guarantee access to economy energy all factor into the increase. The price of fuel is currently high and is expected to remain high throughout the quarter. Necessary planned maintenance will impact lower cost generating units, requiring the utilization of higher cost generation.
Due to constraints on natural gas in the Cook Inlet, GVEA does not expect to be able to purchase economic energy from southcentral utilities. These factors combined, coupled with GVEA’s commitment to meet the energy needs of our members, increased the F&PP rates this quarter.
Additionally, looking back at the previous quarter (December 1 through February 29), Healy Unit 2 was offline for an unexpected, unprojected 26-day outage. As a result, GVEA had to generate energy to make up the production shortfall using our more expensive Naphtha and diesel plants. At the same time, fuel market prices were higher than projected. Due to these circumstances, the balancing account grew to a $10.7 million under-collection, which must be recouped this quarter.
Why is GVEA Not Getting Any Economic Energy Over the Next 3 Months?
As has been widely reported in the state, the extreme cold weather experienced throughout Alaska in recent months—particularly in southcentral Alaska—strained the natural gas supply. The entities that provide GVEA with economic energy cannot commit to any firm amounts due to current circumstances. GVEA will continue to monitor and pursue any economic energy that may become available on a daily basis consistent with current practices.
What is GVEA Doing About the Cost of Power?
GVEA understands any rate change has an impact on members and businesses. The recent increase in GVEA’s cost of power underscores the necessity for GVEA to aggressively pursue and secure lower-cost, reliable energy to replace underperforming generation units and reduce GVEA’s reliance on higher-cost generation. GVEA is actively pursuing a strategic generation plan focused on reducing costs without impacting reliability.
Why Does the F&PP Rate Fluctuate?
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. Other factors 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.
Why Is the F&PP Rate Changed Quarterly Instead of Once a Month or Once a Year?
Like other regulated electric utilities, GVEA is required by its governing body, the Regulatory Commission of Alaska, to update its F&PP quarterly. Additionally, as the F&PP rate charges only actual costs, quarterly adjustments allow GVEA to timely collect or refund any over or under-collection of this rate to reflect GVEA’s actual fuel expenses and generation purchases.
Who Determines Whether GVEA Can Raise or Lower the F&PP Rate?
GVEA follows the same Regulatory Commission of Alaska-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.