Consumers can expect to see slightly lower electric bill rates next month as the Tennessee Valley Authority is reporting costs at near three-year lows. The rates, however, are constantly fluctuating in response to various factors and make up only a small portion of a customer's bill, local officials said.
Utilities such as Warren Rural Electric Cooperative Corp. and Bowling Green Municipal Utilities buy power from TVA, and it is reporting fuel costs about 25 percent lower than the three-year average. The lower costs are being attributed to milder weather this winter than last and lower natural gas prices.
Those savings are ultimately passed on to consumers.
The April, total monthly TVA fuel cost will be 1.717 cents per kilowatt hour for residential and business customers compared to a fuel cost in April 2015 of 2.384 cents, according to TVA.
But TVA’s fuel cost makes up just a small portion of a customer’s bill, said BGMU Customer Relations and Communications Manager Christy Twyman.
For an average customer using 1,000 kilowatt hours, the difference in fuel cost in April 2015 and April 2016 is about $7.03. However, TVA had a base rate increase in October, so that customer would see a total bill savings of $5.31, according to Twyman.
In April's bill, the monthly TVA fuel cost for Warren RECC members for the same 1,000 kilowatt hours of usage will be $18.56, according to an email from Rick Carroll, senior director of communications and legislative affairs for Warren RECC. In April, residential members using 1,000 kilowatt hours of electricity would have paid a TVA fuel charge of $25.78 – $7.22 more than the current charge. However, the more kilowatt hours a home uses, the higher the fuel cost, Carroll wrote.
"One of the biggest drivers of fuel cost is demand. When the weather is very cold or very warm, people use more power. That means TVA uses more fuel to provide that electricity," according to a TVA news release. "The fuel cost portion of the power rate rises and falls every month, with demand as a major factor. TVA recovers the cost of that fuel through monthly electric rates. The good news for consumers is that when the weather is considerably mild, wet or both – as it was in December 2015 and January 2016 – fuel costs go down."
The fuel rate, however, fluctuates from month to month, Twyman said, a point echoed by Carroll.
The "TVA fuel rate fluctuates every month, depending on demand for power, weather and the fuel TVA purchases – like natural gas and coal – to produce electricity," Carroll said.
TVA provides power to local providers who service about 9 million consumers across 7 states.
"Fuel costs for 2016 thus far are 10 to 20 percent below the three-year average, thanks in part to abundant hydro power," according to the TVA release. "Hydro production is our least-expensive generating resource. The fuel, in the form of rain and runoff, turns TVA’s turbines. As water is a renewable resource, it can be used repeatedly. December and January featured above-normal hydro production, which translated into some of the lowest fuel costs since 2010."