What is the PCAC?
The PCAC stands for Power Cost Adjustment Clause, and is a monthly billing item applied uniformly to all customers. The PCAC can be either a charge or a credit on the billing statement, and is applied to your total energy usage (kWh).Why do we have a PCAC?
Stoughton Utilities purchases wholesale power on a month-to-month basis, and the cost can be very different from one month to the next. Because electric rates are fixed by law, SU has to sell electricity to retail customers at a fixed retail rate regardless of actual wholesale cost. If the wholesale cost of electricity changes and the retail rate is fixed, the difference between the two represents a profit or a loss to the utility.
Because Stoughton Utilities is a community-owned, not-for-profit utility, we are not allowed by law to keep any profits, and it is also recognized that it is not good for the community if SU operates at a loss. The Public Service Commission of Wisconsin (PSC) therefore requires by law that SU utilizes a way to balance the profit and loss of the monthly wholesale cost against the fixed retail rates. This is the PCAC.
Some utilities have a different name for it, such as the Fuel Cost Adjustment (FCA), since changing fuel costs are one of the main reasons that the price of wholesale energy changes every month. Regardless of the name, it amounts to the same thing: a line item on your bill that changes every month and is linked to your energy usage.Why does the PCAC change every month?
The PCAC is affected by the wholesale cost of energy. Here are some examples of things that change the cost of wholesale electricity:
Weather: Wholesale electricity is mainly purchased through long-term agreements that assume summers will be hot and winters will be cold. Because energy cannot be stored, it has to be scheduled and bought in advance. If a summer is cooler than expected, fewer people will be using their air conditioners, meaning the energy was reserved and purchased was not consumed. If a summer is warmer, not enough energy may have been purchased, causing the utility to have to purchase more energy on the market at higher costs.
The same scenarios can also occur with winter temperatures, since electricity is required for furnaces and space heaters.
Fuel Costs: The cost of wholesale electricity depends largely on how the generators are powered. The least expensive generators are those that use nuclear energy and hydroelectric (water-driven) energy. Generators that burn natural gas and coal are a little more expensive. The least economical type of generation is anything that is powered by gasoline or diesel fuel, and these generators are usually only used in emergency situations.
When system demand increases, sometimes it is necessary to run higher-cost generators. As with any commodity, fuel pricing is impacted by supply and demand. When demand for coal or natural gas is high, the costs to run power generation plants may increase. Also as demand for a commodity increases, so do the costs to transport that commodity. When any of these things occur, the extra costs are added into the cost of the wholesale energy that is billed to the utility.
Unplanned Events: Unexpected events can interrupt the generation or transportation of electricity. Past examples in Wisconsin include a severe storm that damaged a main transmission line, unscheduled maintenance on a reactor cooling line that required taking a nuclear power plant out of service, and damage to the fins on a steam turbine that required taking a coal power plant out of service for repairs. When unscheduled events like these happen, arrangements for short-term wholesale power purchases must be made. Buying energy on the wholesale market without advance arrangements is much more expensive, and the additional costs are added into the cost of the wholesale energy that is billed to the utility.What can I do about my PCAC costs?
The Wisconsin PSC requires the PCAC be based on each utility customer's total energy usage (kWh). This ensures all utility customers equally share any extra cost or benefit resulting from higher or lower wholesale energy costs. Because the PCAC is applied to the amount of electricity you consume, using less energy every month will reduce the impact of the PCAC on your monthly bill.What can the utility do about PCAC costs?
The PCAC is directly linked to the cost of wholesale energy, which generally increases as inflation drives operational, fuel, and transportation costs higher over time. Stoughton Utilities periodically adjusts the fixed retail rates to account for changes in wholesale energy costs, as well as cost recovery of infrastructure and services. When a rate adjustment occurs, the PCAC becomes much closer to zero, and becomes only a very small amount on the billing statement. These periodic rate adjustments can make your monthly bills much more predictable.