Utilities can’t profit from fuel adjustment charge
Published 6:00 pm Wednesday, July 12, 2017
A reader recently asked about the fuel adjustment charge on energy bills and how it’s affected by natural gas prices. The Informer today reprints part of a column from January 2016 that answered a similar question:
When oil prices were about $90 to $100 a barrel, Entergy asked the Louisiana power commissioner for a fuel charge and it was granted. Now that fuel is at rock bottom shouldn’t this fuel charge be reduced?
Entergy Louisiana uses “a diverse mix of fuels” to generate electrical power, but it relies mostly on natural gas, not oil, said utility spokesman Mike Burns.
“Like oil, however, the cost of natural gas has dropped in recent years with the discovery of abundant supplies in shale formations in Louisiana and other parts of the nation. …,” Burns wrote in an email.
“The decrease in the cost of natural gas is reflected in the fuel adjustment charge, and the bills have declined with the decline in natural gas prices.”
The fuel charge, which the state Public Service Commission approved in the 1970s, allows the utility to recoup the money it spends on natural gas. The costs “are passed on, dollar-for-dollar, to customers at cost and are audited by the Louisiana Public Service Commission,” Burns said.
State law prohibits utilities from profiting on the fees, which are variously known as “fuel adjustment charges,” “gas cost adjustments” and “purchased gas adjustments.”
As The Informer has noted, regulators approved the charges in an effort to prevent frequent rate increases and keep utilities from unfairly profiting when customers’ base rates exceeded companies’ actual fuel costs.
Among the consumer protection mechanisms listed in a PSC general order issued in 1997:
“All electricity consumers are ensured that they will only pay the actual cost of fuel utilized to produce electricity, no more and no less. … .”
“All electricity consumers are ensured that only the direct cost of fuel, and no other charges, are passed through electric company fuel adjustment clauses. This requirement will protect consumers from paying unauthorized charges and prevent utilities from accelerating the recovery of non-fuel costs.”
“The monthly fuel adjustment clause filings required by this General Order will ensure that the Louisiana Public Service Commission and its Staff have data made available to them on a timely basis to guarantee that only appropriate direct fuel costs are included in the fuel adjustment charges paid by customers.”
“The Staff of the Louisiana Public Service Commission will perform audits of all fuel adjustment clause filings made by every electric public utility in the State, no less frequently than every other year. These audits will ensure that customers are paying the lowest reasonable rates for fuel costs and, in the event that any overcharges are discovered, credits and/or refunds to customer bills may be ordered … . “
“All customers will receive effective consumer protection through the efficient monitoring, auditing, and enforcement activities of the Louisiana Public Service Commission. In addition, any consumer who believes that the fuel adjustment filings are improperly calculated may file a complaint with the Louisiana Public Service Commission.”
Online: www.entergy-louisiana.com; www.lpsc.org.
The Informer answers questions from readers each Sunday, Monday and Wednesday. It is researched and written by Andrew Perzo, an American Press staff writer. To ask a question, call 494-4098 and leave voice mail, or email informer@americanpress.com.
