What is a Power Cost Adjustment ?

The electric utility industry (like most industries) is incredibly overstocked with its own set of acronyms.  PCRF is another one in that long list.  PCRF is an acronym for Power Cost Recovery Factor and it is something HOTEC deals with on a monthly and sometimes daily basis.  The PCRF 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 HOTEC is a distribution cooperative, our wholesale power is purchased from a generation company, Brazos Electric Cooperative.  Approximately 84 percent of the wholesale power HOTEC gets from Brazos is generated using natural gas as the fuel. 

When natural gas prices rise, it costs Brazos more to produce electricity and this is passed through to HOTEC and its members by an increase in the PCRF.  So while HOTEC’s rate for the price of electricity has not changed, members will pay more with an increased PCRF.

Natural gas prices do not just affect HOTEC or Brazos — 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 PCRF 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 PCRF more dramatically.

The main advantage of monthly changes in the PCRF 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 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 and no one knows when or if natural gas prices will decrease from their current levels.   

To help curb the effects of high natural gas prices, HOTEC encourages all members to conserve energy.

See our Rate Page for monthly factors.

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Last modified: 09/02/08 - ©2000 All rights reserved