What is the Fuel Cost Adjustment?
The Fuel Cost Adjustment (FCA) is the mechanism TVA uses to help recover fluctuating fuel and purchased power costs. The FCA ensures TVA recovers costs as they occur, helping TVA better match its revenues to expenses. Most utilities use similar mechanisms to adjust their rates. It is subject to change monthly.
Why do consumers pay for fuel?
About half of TVA’s power supply comes from fossil fuels used to make electricity – coal, oil and natural gas. When the prices of these fuels increase, TVA’s costs increase.
How is the FCA calculated?
The FCA is calculated monthly as generation fuel costs and the cost of power TVA purchases from other suppliers rise and fall. The FCA calculation works by capturing the difference between the amount that TVA forecasts to pay for fuel during a given month and the amount that is collected through rates. This formula has two main components: the first is a forecast of anticipated fuel and purchased power costs; the second is a reconciliation of any fuel costs TVA under or over collected. The FCA is used to determine energy charges that are shown on customer’s bills.