Fuel & Purchased Power

The F&PP rate is a component on a member’s bill and is applied based on kilowatt-hour (kWh) usage. The F&PP rate is determined by the cost GVEA incurs to generate power to meet the needs of our members, based on fuel prices, generating units and our ability to purchase power from other local and southcentral utilities and/or entities.

The calculation is adjusted quarterly and includes two components: (1) what we project will be our cost of power over the next quarter, and (2) a true-up of any over or under collections from the previous quarter (i.e. the difference between what we projected the previous quarter and what actually occurred). The F&PP rate is a pass-through of GVEA’s actual fuel and purchased power costs. There is no markup on this charge.

Just like gas prices at the pump when you fill up your vehicle, the F&PP rate is impacted based on the price of fuel. Unlike the price of natural gas in southcentral Alaska, GVEA’s price for fuel can be unpredictable and susceptible to changing fuel market conditions. There are also other factors that contribute to fluctuations in the F&PP rate, such as unexpected outages and shifting availability of power to purchase. All of these have an impact on the calculation of the F&PP rate.

Like other regulated electric utilities, GVEA is required by its governing body, the Regulatory Commission of Alaska to update its F&PP on a quarterly basis.

GVEA follows the same Regulatory Commission of Alaska (RCA)-approved methodology every quarter to calculate the F&PP rate. The projected rate is then filed with the RCA. Under the RCA’s regulations, the F&PP rate change takes effect immediately upon filing with the RCA, however, the rate is subject to the RCA’s subsequent review, adjustment and approval.

For the rate effective March 1 through May 31, the cost of fuel, scheduled generation unit maintenance and the inability to guarantee access to economy energy all factor into the increase. The price of fuel is currently high and is expected to remain high throughout the quarter. Necessary planned maintenance will impact lower cost generating units, requiring the utilization of higher cost generation. Due to constraints on natural gas in the Cook Inlet, GVEA does not expect to be able to purchase economy energy from southcentral utilities. These factors combined, coupled with GVEA’s commitment to meet the energy needs of our members, result in an increase in the F&PP rates.

Additionally, when looking back at the previous quarter (December 1 through February 29), Healy Unit 2 was offline for an unexpected, unprojected 26-day outage. As a result, GVEA had to generate energy to make up the production shortfall using our more expensive Naphtha and diesel plants. At the same time, fuel market prices were higher than projected. Due to these circumstances outside GVEA’s control, the balancing account grew to a $10.7 million under-collection, and that must be recouped going into the next quarter.

As has been widely reported in the state, the recent extreme cold weather experienced throughout Alaska, particularly in southcentral Alaska, put a strain on natural gas supply. The entities that provide GVEA with economy energy cannot commit to any firm amounts due to current circumstances. GVEA will continue to monitor and pursue any economy energy that may become available on a daily basis consistent with current practices.

GVEA understands that any rate change has an impact on members and businesses. The recent increase in GVEA’s cost of power underscores the necessity that GVEA continues to aggressively pursue, and secure lower cost reliable energy to replace underperforming generation units and reduce GVEA’s reliance on higher cost generation.