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Home Page > Consumer Assistance > Consumer Tips > Tip of the Week

Consumer Tip Sunday, July 30, 2006



 

ABOUT THAT FUEL CHARGE
ON YOUR ELECTRIC BILL....

During recent months, you have undoubtedly noticed an increase in the prices of various fuels that are used to meet daily energy needs.  From the gasoline that powers our cars to the natural gas that is used to heat homes, fuel prices are on the rise.  With this in mind, the Florida Public Service Commission (PSC) urges Florida's consumers to conserve energy, and to take time to understand how the PSC monitors the fuel price increases that occur in the marketplace.

Take a look at your electric bill.  You will note an item known as a "fuel charge" which represents a large portion of your electric bill.  The cost of the fuel (coal, natural gas, etc.) used to generate electricity is the single largest expense a utility incurs. 

 

Until 1974, the PSC allowed utilities to recover fuel expenditures through a line item on the customers' bill known as the energy charge.  When fuel prices increased rapidly, the utilities requested frequent changes in these charges. The PSC held extensive hearings each time a utility experienced large fluctuations in fuel costs.  Such proceedings were time-consuming and expensive.

 

In response, the PSC changed the utilities' cost recovery method by requiring them to collect a periodically adjusted fuel charge to recover their fuel expenditures, thereby reducing the energy charge and eliminating much of the


energy charge's volatility.  

 

As a result, the utilities request changes in base rates less frequently because the non-fuel expenditures currently recovered through energy charges are less volatile than fuel expenditures.  Moreover, because the fuel charge limits a utility to dollar-for-dollar recovery of cost-effective, prudent fuel expenditures, fuel price changes do not increase or decrease a utility's profit.

 

Generally speaking, the PSC authorizes each investor-owned electric utility to recover through the Fuel Clause those costs that may be volatile or beyond the utility's control, as long as the utility demonstrates that its expenditures are prudent and cost effective.  The PSC will disallow an expenditure when the record reflects that a utility acted imprudently based on information that was or should have been available to the management prior to the occurrence of a given act or event.

 

In November, the PSC will be establishing the fuel rates that will be applied to customers' electric bills in 2007.  You can view the filings and schedule of events in this review by clicking on this link to Docket No. 060001-EI