GEORGETOWN, S.C. — Mary Ellen Lippert, a resident of the City of Georgetown, received quite a shock when she saw her most recent electric bill.

While the base cost for the month was $153, she had to pay $217 because of an add-on called “fuel adjustment.”

“You always get a fuel adjustment on your bill but it has never been this much,” Lippert said of the extra $62.

Ben Klopp, who lives in the Historic District, experienced the same sticker shock when reviewing his bill from the City Electric Department.

He said the fuel adjustment charge was 37 percent of his most recent bill and 27 percent of his bill the previous month.

 “I really did not pay much attention to it until the past couple of months,” Klopp said.

Now he is paying attention. He called City Hall and asked for an explanation. He received a response from Alan Loveless, head of the city’s electric utilities.

The Georgetown Times was also sent a copy of the response from Loveless.

He said the correct term is Purchased Power Cost Adjustment (PPCA) which, he admits, has always been confusing.

“Simply stated, the PPCA is a method of collecting revenue for the sale of electricity when the wholesale cost of electricity changes every month.  The PPCA allows us to accurately collect revenue without constantly changing the base rates we charge for service.” Loveless explained.

Loveless said the biggest cost to the department is the creation of electricity.

“No matter what fuel source a generating plant uses (nuclear, coal, gas, etc.) the cost of the plant itself is a fixed cost.  The plant’s construction costs are built into the utility’s base rates and are recovered over a long period of time.  However, the cost of the fuel that it takes to run the plant is a recurring cost which can vary greatly from year to year, even from month to month,” he said. “Utilities that provide generation will have a Fuel Adjustment on their bills.  This fuel adjustment will account for the varying cost of fuel that is not built into the base rates.”

The City of Georgetown purchases wholesale power from Santee Cooper and uses City-owned distribution lines to provide service to customers.  

“Therefore, we do not have the cost of fuel as a direct part of our rates.  However, the bills we receive for purchasing our wholesale power do include a fuel adjustment.  This causes our cost per kilowatt hour of purchased power to fluctuate from month to month.  Our PPCA does basically the same thing that Santee Cooper’s fuel adjustment does.  It accounts for those fluctuations and gives us a method to ensure that our bills accurately reflect those costs,” explained Loveless.

He said unlike fuel costs,  factors such as manpower, equipment, operations, maintenance, and normal capital expansion are all things that can be predicted and budgeted with a reasonable amount of accuracy.

“The PPCA compares the actual cost of purchasing power to a base cost which is based on historical data, and provides the means to adjust billing to ensure that revenues are appropriate. We cannot simply pass through the same fuel adjustment rate that Santee Cooper uses because of the timing of the bills.  We purchase power and pay the bill at the end of each month.  We sell that power to our customers and send out bills in four different weekly cycles, so we have paid for our purchased power long before we collect revenue for it.  By the time we have complete data to finalize our cost and sales comparison, approximately two months have passed,” he said. “Because the PPCA is billed up to two months after the power was actually purchased, there is a true-up calculation included to ensure that we do not over-collect or under-collect.”

“The City of Georgetown is currently involved in a rate study to ensure that rates are accurately reflecting the costs of purchasing power and providing service. This rate study will consider the increased cost of purchased power as well as our more predictable costs of operations, maintenance and capital improvements. There will be an upward adjustment of base rates, but the PPCA should come closer to the goal of balancing out at zero over a year’s time.”  

The Times attempted to compare the city’s fuel adjustment rates with those charged by Santee Electric Cooperative but was told no one who can speak on the issue was in the office Friday.

By Scott Harper

sharper@gtowntimes.com