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News
10/19/2009
Understanding the Fuel Charge and Environmental Surcharge
What is the Fuel Adjustment Charge?
It is charge to recover the cost of fuel to generate electricity.
- The Fuel Adjustment Charge (FAC) that appears on your bill represents the cost of the fuel for the power plants that generate your electricity. For the most part, it is the cost of coal, but it also can include the cost of natural gas and/or purchased power. Purchased power and gas-fueled power both tend to be significantly more expensive than coal-fueled power.
All money collected for the FAC is passed on to our wholesale power supplier.
- The FAC is a pass-through expense. You local cooperative collects the FAC from its members and then passes all of that money on to its wholesale power supplier, East Kentucky Power Cooperative (EKPC). Your local cooperative does not keep any of the FAC that it collects.
The FAC is regulated and monitored by a government agency.
- State government regulators (the Kentucky Public Service Commission) closely monitor the FAC charged by EKPC to your local cooperative to ensure that only proper expenses are included. Proper expenses include the cost of power plant fuel or purchased power.
Why does the FAC vary so much from one month to the next even though my usage stays the same?
The cost of power plant fuel and purchased power can fluctuate significantly from one month to the next for several reasons:
- The market cost of coal, natural gas and purchased power may rise or fall.
- If EKPC has a coal-fired generating unit out of service for maintenance, then that power must be generated by an alternative source or purchased on the power market, both of which tend to be much more expensive.
- Even if all coal-fired generating units are operational, EKPC occasionally must operate natural gas-fueled units or purchase power from the market because power usage is so high. This tends to occur on days when it is very hot or very cold because homes and businesses are using more electricity for cooling and heating.
What is the Environmental Surcharge:
It is charge to recover the cost incurred by EKPC to comply with federally mandated environmental regulations.
- The environmental surcharge that appears on your bill represents the cost of the equipment and other expenses that EKPC has invested in their power plants to meet federal environmental regulations related to the emissions generated by power plants. For the most part, it includes the cost of scrubbers that remove emissions before they are released into the air. These regulations have become more stringent in recent years, resulting in the investment of millions of dollars in equipment at power plants.
All money collected for the environmental surcharge is passed on to our wholesale power supplier
The environmental surcharge, like the fuel charge, fluctuates each month based on emissions levels from power plants and other expenses that EKPC has to meet the emissions guidelines set by the Environmental Protection Agency.
- If EKPC must operate natural gas-fueled units or purchase power from other electric companies to meet demand, that can affect the surcharge.
The environmental surcharge is regulated and monitored by a government agency.
- State government regulators (the Kentucky Public Service Commission) closely monitor the rate of EKPC’s environmental surcharge and require that it be approved by the commission each month before it is passed on to the electric cooperatives served by EKPC.
More than 70 percent of our costs are passed on to us by EKPC. These include the cost to generate electricity, the fuel adjustment charge and the environmental surcharge.
- All of these charges are set and approved by the Kentucky Public Service Commission following extensive reviews and hearings.
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