Power Cost Adjustment
The electric utility industry (like most industries) is incredibly overstocked with its own set of acronyms. PCA is another one in that long list. PCA is an acronym for Power Cost Adjustment and it is something Big Country Electric Cooperative (BCEC) deals with on a monthly and sometimes daily basis. The PCA is the rate component, on all electric bills, that is a direct reflection of the fluctuating cost of natural gas required to run an electric generation plant.
Since BCEC is a distribution cooperative, our wholesale power is purchased from a generation company, Golden Spread Electric Cooperative (GSEC). Approximately two-thirds of the wholesale power BCEC gets from GSEC is generated using natural gas as the fuel.
When natural gas prices rise, it costs more to produce electricity and this is passed through to BCEC and its members by an increase in the PCA. So while BCEC’s rate for the price of electricity has not changed, members will pay more with an increased PCA.
One way to think about PCA is to compare it to the cost of gasoline for your car. Even though your monthly car payment (the rate) hasn’t gone up, the car you drive is costing more to operate now because just as natural gas prices have risen, so have gasoline prices at the pump (the PCA).
Natural gas prices do not just affect BCEC or GSEC — nearly every electric utility in the nation is facing this same issue. With the growing use of natural gas as a fuel for electric generation, demand for natural gas grows annually. As we all know, with demand high and supplies lower, the price is going to rise.
To minimize the impact of this charge on our members, every attempt is made to “level” the PCA monthly, rather than to pass on the sometime extreme monthly fluctuations from our wholesale supplier. However, significant changes in fuel charges may make it necessary to adjust the PCA more dramatically.
The main advantage of monthly changes in the PCA is that it is more responsive to changes in fuel costs. If fuel costs go down, our members are not stuck with a higher cost indefinitely. Investor owned utilities, such as AEP and TXU, can only make rate adjustments for changes in fuels costs twice annually and must gain approval from the Public Utility Commission of Texas to do so. This means their fuel cost adjustments may remain higher for their customers for an indefinite period of time and no one knows for certain when or if natural gas prices will decrease from their current levels.
To help curb the effects of high natural gas prices, BCEC encourages all members to conserve energy. For more tips on ways to efficiently use less electricity, visit the Energy Conservation section of this Web site.