Fuel Cost Adjustment

The Fuel Cost Adjustment for April, May, and June is between 0.563 and 0.575 cents per kilowatt hour (depending on your classification).  It will have an average effect of approximately $5.63 to $5.75 per 1,000 kilowatt hours of usage.  An adjustment will be made every quarter (January, April, July, October).

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.  The FCA is due primarily to a forecast increase in coal costs.  TVA maintains long-term contracts with suppliers to help keep coal costs stable and well below spot market prices.  However, when suppliers have mine production problems, TVA must buy more expensive replacement coal on the spot market.  Additionally, as coal contracts expire, TVA must replace them with new contracts at current market prices.

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.