How fuel cost billing changes could affect you
How fuel cost billing changes could affect you
By Jack Money
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Published: August 8, 2008
Oklahoma's Corporation Commission is rethinking how electric utilities are compensated for fuel costs — again.
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What's next?
Conference to focus on issue
Andrew Tevington said he expects the Oklahoma Corporation Commission staff will schedule a technical conference on utility fuel cost compensation later this year.
Jeff Cloud, chairman of the commission, said the issue is worth a look.
"People are bearing the brunt of higher energy costs,” Cloud said. "If there is something we can do as a commission that could ease their burden, then we need to do it.”
How it works
State law allows regulated electrical utilities to bill customers for the fuel they use to make electricity. The companies file annual fuel cost estimates to the commission, and make changes in customers' bills to recover the costs.
If fuel costs go up, then so do customers' bills. If fuel costs go down, then so do customers' bills. The changes happen unless the three corporation commissioners overrule the utility based on arguments from individuals or groups — including commission staff, which reviews the filings.
This year, both Oklahoma Gas and Electric Co. and the Public Service Co. of Oklahoma customers are seeing substantial increases in their monthly bills because of higher fuel costs for natural gas and coal.
What could change?
Utilities file fuel cost adjustments on an annual basis now.
But the commission and staff are asking whether it should be done more frequently.
Andrew Tevington, deputy director of the commission's public utilities division, said utilities have been allowed to make fuel cost adjustments for about four decades.
As time has gone by, Tevington said, utilities have been allowed to do it on a monthly basis, a quarterly basis, and a semi-annual basis, as well as the annual method that's being used today.
Each method has advantages and disadvantages, he said.
The pros and cons
Monthly estimates keep bill changes small. But they can confuse customers because the fuel might be bought one month and used the next, and customers won't see needed changes until the month after the fuel is used. Quarterly adjustments also keep bill changes small.
But quarterly changes in fuel costs could be a problem for commercial customers with annual budgets.
Semi-annual adjustments mean bigger changes in customers' bills, while annual adjustments bring the biggest changes of all — especially when fuel costs have escalated for utilities like they have in the past year.
Locking in a price
Some groups want the commission to require utilities to "hedge” a portion of the fuel they use — in other words, lock in a price for it months ahead of when it actually is needed. That suggestion sounds good when natural gas prices are quickly climbing. But when they quickly fall, then customers could be stuck paying more for the gas than it's actually worth.
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