What is a Fuel Cost Adjustment?

The (Fuel/Energy Cost Adjustment) line item on your Craighead Electric bill usually does not get much attention, except during times of high energy cost when it impacts your bill the most.

Craighead Electric generates no energy on its own. Its energy is purchased from Arkansas Electric Cooperative Corporation (AECC). When the cost to generate that energy fluctuates a fuel cost adjustment is applied to each member’s bill. This adjustment factor (charge or credit) is multiplied by kilowatt-hours used in the current month. The fuel cost adjustment is usually small, and there is no profit added. It is an expense that is passed directly from wholesale to the consumer.

What causes it to go up or down?

When the price of the fuel used to generate electricity goes up or down, so does the cost of that electricity. For instance, if the price of natural gas rises or the supply of coal grows short it may cause a higher generation cost and thus a higher fuel cost adjustment.

What is being done to keep it low?

AECC has a diverse portfolio of different types of generation that fortunately reduces the cost impact of severe weather events and shortages. In 2017, AECC’s electricity was generated by coal (54 percent), natural gas (18 percent), hydro, and wind (18 percent), with the remaining coming from regional energy markets. This robust mix hedges against dramatic changes in generation fuel cost. Learn more about fuel/energy cost adjustments at aecc.com/smart-energy-tips/energy-cost-adjustments.

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