Fuel Adjustment

If you look at your Town of Havana utility bill, it has two electric-related charges:

1) ER, which stands for Electrical Residential or EC, which stands for Electric Commercial and

2) FA, which stands for Fuel Adjustment. The fuel adjustment has been there for years, but many people may not have noticed it because for a long time it was zero or sometimes a credit!

Lately, things have changed. What has changed is the price of natural gas. Natural gas is used for fuel in many power plants. Earlier this year, gas prices shot up to nearly three-times higher than the long-term average price. Currently, the price of natural gas is approximately double the long-term average. The price increases are affecting electric utilities throughout the country.

Since the Town of Havana is a not-for-profit utility, when our costs go up for something significant and uncontrollable like natural gas costs, unfortunately, the additional costs must be reflected in our bills to customers. This is why the fuel adjustment is increasing.

Our utility’s rate structure, which is approved by the Public Service Commission (PSC), has a base residential electric rate or base commercial electric rate that is estimated to cover the general costs of providing electric service. Our rate structure also includes a fuel adjustment to reflect changing fuel prices.

 Fuel costs are the largest single variable expense for electric utilities, and fuel prices can vary greatly on the basis of supply and demand. Recognizing this, the PSC has allowed fuel adjustment charges since the oil embargo of the 1970s. Under utility rate regulation, fuel costs are passed along to electric customers at cost. Electric utilities do not profit from increased fuel costs.

Having a fuel adjustment is the approved way for electric utilities to deal with the ups and downs of energy costs. If we didn’t have a variable fuel portion to our rates, as prices change up or down we would have to go the PSC to change our base rate, which would take time and cost money.

That doesn’t make it easier to accept when prices go up, but when prices come down and believe me we are working hard to make that happen we can more quickly pass the savings along to the customer.

As your hometown utility, we exist for a purpose, not for a profit.