GCEC “Fuel Adjuster” a Reflection of the Cost of Fuel to Generate Power

Sometimes up, the fuel adjuster has been down this year: “A good problem to have” says CEO

Just as the cost of gas at the pump for your car can go up and down because of supply and demand or other factors, the cost of fuel to generate your electricity can also fluctuate – and often does.

To take that into account, every Member of Graham County Electric Cooperative – as well as customers and Member/consumers of other not-for-profit electric cooperatives – can see what’s called a “fuel adjuster” on their bill.

Sometimes it adds to the monthly total, and at other times, like the summer and fall months of this year, it actually lowers the monthly bill.

Phil Cook, GCEC CEO, said this year has seen lower fuel prices, so;

“So, this year for a good part of the year we’ve had zero or right now we have a -1-cent fuel adjuster so that’s a 7-cent swing from last summer,” Cook said.

It’s that 7-cent swing and the memories of electric bills from the summer of 2023 that have some GCEC members nervous.

“We’ve had a few members call and ask or say, ‘there must be some problem I have this negative number on my fuel bill’ and we assure them that this is not a mistake, and no one is going to get a higher bill later,” Cook said.

GCEC gets its power at a wholesale rate from Arizona Electric Power Cooperative which, like GCEC, is a not-for-profit cooperative, in this case a generation and transmission cooperative.

AEPCO generates the power using a variety of fuels which includes a mix of coal, natural gas, and solar, as well as power generated off-site from third-party providers that may include wind and hydropower (generated by dams).

Cook said It’s the coal and natural gas that have the greatest impact.

“Last year saw a lot of volatility in prices for those fuels and so we had a 6- cent fuel adjuster, which is an additional six cents per kilowatt-hour, so our Members saw that additional charge because of the very high fuel prices,” Cook said.

It was also a matter of supply and demand, with extraordinarily long periods of triple-digit weather all across the state of Arizona in 2023 that increased the demand for electricity, which meant AEPCO had to purchase power to augment its own generation capacity.

However, Cook said it could have been much worse but for the fact that AEPCO hedges fuel prices – or tries to anticipate ahead of time what they’re going to be and makes advance fuel purchases to try to buy at the lowest rate possible.

“I think they do an excellent job trying to manage fuel prices and buy at the right time,” Cook said.

“Our Members need to know that they look six months out, a year, or even two to three years out to try and understand what fuel prices are going to do, and hedge against the increases,” Cook said.

“There’s (computerized) software predictability that goes into it (and) there’s a lot of pretty smart people who figure out what and when to buy, with the result that we haven’t used a lot of coal this year because natural gas has been so much cheaper than coal,” Cook said.

“So, it’s interesting because it’s something we don’t have any control over, locally, and we can be a recipient of higher or lower prices depending on a lot of factors; for example, some of it is national policy, some of it is what’s happening globally,” Cook said.

“Some companies liquefy the natural gas and send it overseas and so it’s a supply and demand issue at some point as well.”

Cook said there’s another facet to AEPCO operations that helps keep prices – and that fuel adjuster – down, and lower than it would be otherwise.

“AEPCO has retrofitted one of its two main units to be able to burn either coal or natural gas – whichever is less expensive – and the other to burn only natural gas when that’s the least expensive fuel, so it gives you the ability to take advantage whichever unit and whichever fuel is less costly.”

“It makes a big difference; in previous years coal was the cheapest fuel and using it saved AEPCO and its Members millions of dollars, because gas was so volatile and expensive, whereas now gas is less expensive and we can take advantage of that,” Cook said.

Diversification is always good, said Cook.

“And, the bottom line is this – we’re always doing what we can to keep the bills as low as we can for the Members,” Cook said.

For more information about GCEC and its programs, visit the co-op website, or call GCEC at (928) 485-2451.