Power Cost Adjustment

What is the Power Cost Adjustment?

Following the recommendations of a rate study by consultants Black and Veatch, the Paducah Electric Plant Board in April 2013 voted to implement new rates which included a Power Cost Adjustment (PCA) that was to be applied to bills beginning in the final quarter of 2013.  The PCA, commonly used by electric utilities, rises or falls, based on the fluctuations associated with buying wholesale power.  It allows PPS to make sure it collects enough money to pay for the cost of wholesale power without constantly changing our base rates.  Paducah Power’s PCA is reviewed and adjusted quarterly, based upon power costs in the previous months.  It can be “zero”, having no effect on customers’ bills or it can rise or fall, raising or lowering customers’ bills accordingly.    

 

November 1st, 2013, the PCA went from zero to .008125 (.8 cents per kilowatt hour).  On February 1st, 2014 it was adjusted to .0359 (3.59 cents per kilowatt hour).  On May 1st, 2014, it dropped slightly to .0357 (3.57 cents per kilowatt hour).  Most recently, the board recalculated the PCA a month early and dropped it 40% to .0215 (2.15 cents per kilowatt hour) in order to give customers relief as soon as possible.    

 

Why did the PCA increase so much February 1st?

The PCA is tied directly to the performance of the Prairie State Generating Plant which provides us with power.  The better it operates, the lower our PCA goes.  The plant is still in its shakedown phase.  During the autumn months the plant did not perform as well as expected due to mechanical issues that had to be corrected.  PPS had to buy power on the open market and still pay the debt service on the portion of the plant that we own, making our power costs considerably higher than we anticipated.  The PCA rose to recoup those extra costs.  It was not an attempt to price gouge our customers. 

   

What will the PCA be in the coming months?

It depends on the overall performance of the plant’s two generating units.  Near the end of May 2014 an incident occurred at the Prairie State Generating Plant that caused Unit 2 to be taken offline for repairs.  According to Prairie State, while they were taking Unit 2 offline for a scheduled maintenance outage, a water storage tank overflowed resulting in an unexpectedly high release of steam and water that damaged the siding and associated equipment.   No workers were injured and no explosion or fire occurred.   Neither the boiler nor the turbine generator was damaged.  After repairs, Unit 2 resumed operations.  The operations were sufficient to allow PPS to drop its PCA by 40% July 1st.

PPS is aggressively working with the other owners of Prairie State to get the plant operating at maximum reliability levels and to bring the PCA down as quickly as possible.  Our goal remains the same as it was when we chose to leave TVA and invest in Prairie State-to provide our customers with a secure energy future that is extremely reliable and reasonably priced.