Fuel Cost Adjustment

Q.  What is a Fuel Cost Adjustment?

A.  A Fuel Cost Adjustment (FCA) is a variable energy rate that can fluctuate each quarter (January, April, July, October) as TVA's fuel and purchased power costs rise and fall.

Q.  How does it work?

A.  The actual cost of fuel and purchased power is compared to the projected costs the rates were based on.  The difference is then multiplied by the kilowatt-hours of energy used to account for any changes in price. 

Q.  Why did TVA implement the Fuel Cost Adjustment?

A.  In 2005, the price of natural gas, oil and coal used to generate electricity skyrocketed.  Since then, TVA has found it difficult to predict the amount of revenue that is required to cover the cost of producing power.  The Fuel Cost Adjustment allows TVA to more quickly match costs with revenue and avoid implementing permanent rate increases.

Q.  Does the Fuel Cost Adjustment appear on my bill?

A.  The FCA appears as a dollar amount on your bill.  The adjustment is included in the "total amount due" for the month.  

Q.  Do other utilities have a Fuel Cost Adjustment?

A.  Fuel Cost Adjustments are typically found in private, investor-owned utilities.  Many gas companies, including Nashville Gas, have used a Fuel Cost Adjustment for years.  TVA had a similar mechanism in the 1970's.

Q.  Why does the price of fuel and purchased power fluctuate?

A.  Many factors can affect the costs of fuel and purchased power including the weather, changes in the price of coal and natural gas, and unforeseen changes in the operations of TVA's generating plants.

Q.  Are there other sources of energy that generate electricity at a cheaper rate?

A.  Electricity produced at TVA dams using hydro-electric generators is the most cost effective source.  However, the amount of generation is limited by available natural resources.