Power costs necessitate adjustment

The January Watts & Volts addressed a prolonged outage of the Comanche Unit 3 power plant, from which IREA typically receives more than 50% of its energy. The 750-megawatt super-critical, pulverized coal power plant, which is operated by part-owner Xcel Energy, recently resumed operation after being out of service for a full year. During that time, IREA had to purchase replacement energy from Xcel at about twice the variable cost of Comanche Unit 3 production.

Though we were able to defer much of the additional cost until this year and will seek to recover that cost from responsible parties, we must recover additional revenue to cover our increased power expense.

IREA’s Rates and Regulations include a Power Cost Adjustment (PCA) that allows a temporary credit or charge to adjust for changes to our power costs. IREA last used the PCA in December 2017, when we received an unanticipated credit from Xcel for reduced wholesale power costs. At that time, we passed the entire $8.4 million credit back to customers as a one-time retail bill credit.

Now IREA intends to implement the PCA again, this time to recover revenue needed due to our increased power costs. Our forecasts show we need to recover $9 million in 2021 and $9.3 million in 2022. The PCA would recover these amounts from all rate classes depending upon usage during those times. We expect the impact on residential and small commercial customers using typical amounts of energy to be $4.39 and $7.04 per month, respectively, this year. The monthly amount will be smaller in 2022 because the PCA will continue for 12 months that year and only eight in 2021. We expect that PCA charges will begin in April and will continue through 2022, after which they will be discontinued. If we can recover our costs from another party, the PCA will be reduced or eliminated before then.

IREA has not had a general rate increase since early 2013. We have returned capital credits each year since then and, as noted above, we credited $8.4 million to customers in December 2017. We cannot absorb the costs of the prolonged Comanche Unit 3 outage any longer, however.

More information will be forthcoming next month.