Fuel Rule Equity

The Problem:

Utilities have to estimate what they will pay for fuel (primarily coal and natural gas) to generate electricity up to 1.5 years in advance.  This was workable when fuel prices were stable.  But, as volatility in prices has increased, adjustments have been increasingly necessary.

The Public Service Commission (PSC) agrees the system to adjust for fuel price changes is unnecessarily cumbersome and lengthy.  One result is that the PSC sometimes has to deal with adjustments for increased and decreased prices for the same company at the same time.

Another result is that either the ratepayer or the investor can be unfairly left holding the bag for prices that should have been adjusted.

A more streamlined system could adjust for price volatility to provide fairness for ratepayers and investors.

What the legislation would do:

The PSC agrees that the legislature can clear the way for a streamlined, common sense process for adjusting fuel prices.  The proposal would make it clear that the PSC has the power to establish a system that maintains oversight while ensuring a faster, fairer adjustment.

Most states currently operate with the type of system the PSC would be able to implement under this legislation.

Impact of the Proposal:

WUI members are mostly retired small investors who count on dividends for income.  A catastrophe like Hurricane Katrina can lower our income suddenly as costs come directly from dividends.

The proposal would bring stability to the system and provide fairness to ratepayers and shareholders alike.

Status:

The provision has been proposed for addition to the state budget.  WUI believes it would reduce administrative costs at the PSC.

WUI Position:

WUI supports the legislation because shareholders should not gain or lose income from unpredictable fluctuations in price.