Although the utility relies on coal-fired and nuclear power for more than half of its power, rising natural gas prices have prompted El Paso Electric Co. (EPE) to file for a fuel factor increase and a fuel surcharge that combined would increase the monthly bills of Texas ratepayers by about $9.80 for those using 500 kWh.
"Since January 2008, the price of natural gas used by EPE to generate electricity has increased by more than 30%. Today EPE pays approximately $11/MMBtu for natural gas. Our customers' rates currently reflect a cost of natural gas of $7.83/MMBtu," said EPE CFO Scott Wilson. "However, because EPE generates approximately 60% of its energy from nuclear fuel and coal, the impact of rising natural gas prices is moderated for EPE customers."
EPE filed last week with the Public Utility Commission of Texas (PUCT) to:
Wilson told NGI that EPE serves a summer-peaking load and that, in addition to a spike in gas prices for the period, is why the underrecovery in June and July is so high relative to the December-May period.
The only hedging EPE does is through long-term contracts at fixed prices, Wilson said, noting that the last one was for six months. EPE does no financial hedging and doesn't intend to in the future, Wilson said, adding that customers gain the benefits of volatility management already through the existing fuel factor mechanism.
The fuel factor includes the costs of the fuel used to generate electricity such as natural gas, coal and uranium for nuclear power, as well as electricity purchased from other utilities. Under Texas law, fuel costs are adjusted periodically to assure that utilities collect only their actual fuel costs. The fuel factor increase and surcharge, if approved, would be included in electric bills beginning in October, after the summer cooling season has ended.
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