PCRF
- Power Cost Recovery Factor
The electric utility industry possesses
its own set of acronyms. PCRF is one of those. PCRF is an acronym for Power Cost
Recovery Factor and it is something HILCO Electric Cooperative deals with on a
monthly basis. The PCRF is the rate component, on all electric bills, that is a
direct reflection of the fluctuating cost of natural gas required to
run an electric generation plant.
Since HILCO is a distribution
cooperative, we purchase our wholesale power from a generation company, Brazos
Electric Power Cooperative. Brazos generates approximately 84% of its
electricity using natural gas as a fuel source.
When natural gas prices rise, it costs
Brazos more to produce electricity and those costs are passed through to HILCO
and its members by an increase in the PCRF. So while HILCO’s rate for the
price of electricity has not changed, members will pay more with an increased
PCRF.
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 natural gas prices have risen, so have gasoline prices at
the pump (the PCRF).
Natural gas prices do not just affect
HILCO or Brazos - nearly every electric utility in the nation is facing this
same issue. With the growing use of natural gas as a fuel for, electric
generation, demand for natural gas grows annually. 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 more dramatically.
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 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 an
indefinite period of time and no one knows for certain when or if natural gas
prices will decrease from their current levels.