NOTE TO EDITORS AND HEADLINE WRITERS: The INTERIM adjustment to the fuel factor described in the news release below will result in a temporary increase to customer bills. However, it is incorrect to say it will result in a RATE INCREASE. There are two main components to customer bills: Base rates and the fuel charge.
The reason this distinction is important (and not just a matter of semantics) is that Texas Senate Bill 7 freezes base rates from September 1999 until the Jan. 1, 2002, start date for retail competition. Senate Bill 7 allows adjustments to be made to the fuel charge portion of the bill, if approved by the PUCT.
Also, please be advised we issued a related press release in July on our request to change the fuel factors and a request to add a new fuel surcharge for fuel under-recoveries. Today´s announcement addresses interim approval to put the new surcharge into effect prior to final consideration by the commission.
Anything you can do to ensure these terms are accurately used will be greatly appreciated.
Interim Increase in Fuel Factors Will Go into Effect in September For Central Power and Light Customers
AUSTIN, Texas, Aug. 24, 2000 -- An administrative law judge for the State Office of Administrative Hearings last week approved a request to increase on an interim basis the factors used by American Electric Power´s Central Power and Light (CPL) subsidiary to calculate the fuel charge portion of customer bills. The decision was issued in response to skyrocketing natural gas prices, which have increased over 100 percent during the first seven months of the year.
The fuel factor increase, which is subject to final approval by the Public Utility Commission of Texas (PUCT), will begin on an interim basis with September billing. Under the revised fuel factors, over the period September 2000 through August 2001, bills for residential customers using 1000 kWh per month will increase by an average of $8.51 per month, or an average increase of 11.2 percent in the total bill.
"CPL has multiple sources of generation, including nuclear, coal, natural gas, purchased power and hydro-power. However, natural gas accounts for approximately 47 percent of CPL´s generation and over 70 percent of CPL´s anticipated fuel costs. Natural gas prices have increased from $2.34 per MMBtu to $4.37 per MMBtu since January 1999. Consequently, the substantial increase in natural gas prices that has occurred during the past seven months has had a significant effect on CPL´s fuel costs to generate electricity to meet its customers´ needs," said David Carpenter, AEP director of Texas regulatory Services.
"CPL is taking all efforts to utilize its non-natural gas-fired generation to the maximum extent reasonably possible. But in order to provide electrical service, CPL must purchase natural gas and pay the prices prevailing in the natural gas markets. CPL´s purchased power costs are also heavily influenced by natural gas costs," added Carpenter.
Investor-owned electric utilities in Texas, like CPL, are required by the PUCT to use fuel factors based on cost estimates to collect the projected cost of fuel used to generate electricity at their power plants. When the fuel costs are anticipated to change from their current levels for an extended period of time, the electric utility must request permission to adjust the monthly fuel factors used to determine the fuel charge portion of customers´ bills. When the actual cost of fuel significantly exceeds the fuel charges that customers are paying in their monthly bills, PUCT rules permit the utility to request permission to surcharge the additional amount. When the actual costs of fuel are significantly lower than what customers are paying in fuel charges, the electric utility is required to issue a refund.
The PUCT is expected to consider the increase in fuel factors, as well as a pending request for a surcharge to collect under-recovered fuel costs, in September. In addition to the increase in fuel factors, CPL has requested permission to recover through a surcharge approximately $87.1 million in under-recovered fuel costs for the period from December 1999 through the end of August 2000.
The $87 million amount requested for the surcharge was reduced from the approximately $96.3 million originally requested as the result of a settlement with several participants to the PUCT proceeding considering CPL´s request. That settlement also reduced the total amount of the projected increase in fuel factors from $207.3 million to $173.5 million.
If the PUCT approves the settlement, the surcharge for residential customers using 1,000 kilowatt-hours of electricity will average an additional $4.75 a month beginning in October and continuing through September 2001.
AEP-Central Power and Light is a subsidiary of American Electric Power (AEP). AEP is a multinational energy company based in Columbus, Ohio. AEP is one of the United States´ largest generators of electricity with more than 38,000 megawatts of generating capacity. AEP is also one of the nation´s leading wholesale energy marketers and traders. AEP delivers electricity to more than 4.8 million customers in 11 states--Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia. The company serves more than 4 million customers outside the U.S. through holdings in Australia, Brazil, China, Mexico and the United Kingdom. Wholly owned subsidiaries are involved in power engineering and construction services, energy management and telecommunications.