Power generation costs up; customers absorb increase
Power generation costs up; customers absorb increase Lynn Adams Thu, 09/22/2022 - 22:02
When it comes to electricity and natural gas rates for Sallisaw, there‚s good news and bad news.
Maybe. The bad news is that the Grand River Dam Authority has announced an increase of power cost adjustments for September and October, a cost that‚s passed along to the consumer.
The good news, according to the U.S. Energy Information Administration (EIA), is that natural gas prices are predicted to decrease somewhat by the first of the year as production increases.
As with many things, the prices for natural gas and electricity are driven by supply and demand.
Sallisaw continues to deal with escalating cost for electricity purchased from the Grand River Dam Authority (GRDA). For many utilities, including GRDA, natural gas remains a primary fuel source for power generations. Natural gas markets in May were up 291 percent compared to May 2021.
Despite the EIA‚s prediction of lower natural gas prices by 2023, the agency expects U.S. natural gas prices to remain high through the end of the year due to lower-thanaverage natural gas inventories resulting from factors affecting both supply and demand. Unfortunately for the GRDA and GRDA communities, this means the power costs adjustments (PCA) passed along to GRDA customers will remain high for the foreseeable future.
“According to the U.S. Energy Information Administration, prices of natural gas continue to be driven by electric demand and decreased inventories. This has a direct effect on GRDA and their electric generation,” Skelton says. “As we have stated in the past, both GRDA and the city of Sallisaw cannot absorb the increased cost of electric generation, and must pass this cost on to the ultimate customers. The EIA is currently predicting the Henry Hub Natural Gas price to show some decrease as we enter 2023. This is based on predicted increases in U.S. natural gas production.”
For the present, however, the GRDA has announced PCAs of $0.04045 and $0.04277 per kilowatt hour, respectively, for September and October. Since February, the month of Winter Storm Uri, PCAs have increased 126 percent. To compensate for the increased PCA costs, the city of Sallisaw was forced to implement a cost of power base adjustment (CPBA). The CPBA charge allows the city to recover the PCA that is over the amount included in the city base electric rates.
The CPBA reflected on monthly utility bills for Sallisaw customers is a calculation that allows the city to recover PCA costs over and above the rate component included in the base electric rates of the city. The city‚s base electric rates include a purchase power component (PPC) that allows the city to recover 100 percent of the GRDA PCA cost passed to the city. With the escalating fuel cost GRDA is encountering, the cost of electric being purchased by the city is now surpassing the PPC component in the city‚s rate structure. In order to recover these costs, the city had to begin adjusting rates monthly. This adjustment calculation shows up as a CPBA line charge on the customer‚s electric bill. All customers of the city are receiving this charge. This additional cost will decrease as the cost of generation decreases. If the calculation equals the PPC component in the city‚s base rates, then the CPBA will equal zero.
In plain English, it costs more to generate electricity, and that cost is passed along to customers. When the cost goes down, the electric bill to customers should also.
