Power Cost Recovery Factor- Explained
Unmute the video below to hear a complete explanation of PCRF in our Member Services Podcast.
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.
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.