Power Cost Recovery Factor- Explained
In 2021 Texas experienced its most unprecedented winter weather event in decades. A large majority of the state faced major damage from ice, snow, and extremely low temperatures while also experiencing rolling outages due to limited generation access.
Due to the extreme temperatures, access to fuels, such as natural gas, that are needed for electric generation was impacted and left power suppliers struggling to meet demand. As natural gas supply became somewhat more available, it did so at a price. Power suppliers, like Northeast Texas Electric Cooperative and East Texas Electric Cooperative who Upshur Rural Electric Cooperative purchases from, saw a significant increase in natural gas prices.
When fuel prices rise, it costs Northeast Texas Electric Cooperative and East Texas Electric Cooperative more to produce electricity and some of those costs are passed through to Upshur Rural and its members by an increase in the PCRF, or Power Cost Recovery Factor. URECC’s rate for the price of electricity has not changed and we have no plans to change it at this point in time. However, members may pay more with an increased PCRF in future billing cycles.
The Power Cost Recovery Factor for Upshur Rural Electric Cooperative is adjusted on a monthly basis. The PCRF is the rate component that is a direct reflection of the fluctuating cost of fuel required to run an electric generation plant.
Since URECC is a distribution cooperative, we purchase our wholesale power from two generation and transmission cooperatives, North Texas Electric Cooperative and East Texas Electric Cooperative.
One way to think about PCRF is to compare it to the cost of gasoline for your car. Even though your monthly car payment (the rate) hasn't gone up, the car you drive is costing more to operate now because just as fuel prices have risen, for generated electricity, so have gasoline prices at the pump (the PCRF).
Increases in fuel prices do not just affect URECC, NTEC, or ETEC - nearly every electric utility in the nation is facing this same issue. The demand for electric generation continues to increase. As we all know, with demand high and supplies lower, the price is going to rise.
To minimize the impact of this charge on our members, every attempt is made to "level" the PCRF monthly, rather than to pass on the sometime extreme monthly fluctuations from our wholesale supplier. However, significant changes in fuel charges may make it necessary to adjust the PCRF.
The main advantage of monthly changes in the PCRF is that it is more responsive to changes in fuel costs. If fuel costs go down our members are not stuck with a higher cost indefinitely. Investor-owned utilities, such as SWEPCO or TXU, can only make rate adjustments for changes in fuel costs twice annually and must gain approval from the Public Utility Commission of Texas to do so. This means their fuel cost adjustments may remain higher for their customers for a longer period of time.
We hope that our members were able to stay safe and warm as we all faced one of the coldest winters on record in our area. Rest assured, no matter the weather, URECC works hard every day to provide safe, affordable, reliable electric service to our members.