What is a PCA and why is it necessary?
The Power Cost Adjustment (PCA) is used to adjust costs charged to members when prices of items used to generate electricity spike and fall over time:  fuels (primarily coal and natural gas), environmental modifications to power plants, when additional capacity is purchased, when there are increases in transmission costs.  The PCA allows Hancock-Wood to reflect changes in the cost of power without completely restructuring its existing rate schedule each month.  In short, the concept is that as the cost of producing and transmitting electricity changes, the retail charge for electricity should change accordingly.

In the past when wholesale costs were more stable, you may remember that the PCA rate on your bill would fluctuate up and down.  Since that time, wholesale costs have continued to rise.

So why has the cost of power increased?

There are several causes for the increases – including rising transportation
costs for both rail and truck and the impact of higher fuel prices on mining operations – but the single biggest reason for the impact is that China and India are eating up much of the world’s coal supply.  As those nations’ fast-growing economies demand more electricity and new power plants go on line every week, a bigger share of European coal supplies are heading to the far east.  Since European power companies still need coal to run their own power plants, Appalachian coal that was being sold to American power companies is now being loaded onto boats and exported to Europe.  The current weakness of the dollar makes purchasing coal from America a smart economic move for Europe and Asia.  The result is that prices worldwide have been soaring, and the large utility companies who generate and sell much of the power we supply to your homes and businesses have been raising their rates to cover the higher fuel costs.

Closer to home, two specific issues have impacted Ohio's cooperatives.  One is the need to purchase more generating capacity.  Our generation and transmission provider, Buckeye Power, purchased an additional 203 megawatts of baseload generating capacity through participation in OVEC.  Buckeye also united with other providers nationwide to bring a portion of a 150 megawatt wind farm's renewable energy to Ohio.  All of these are excellent parts of a portfolio mix, but of course, there is a cost to all of it.

Another issue is the millions being spent to retrofit power plants with environmental controls.  Coal is cleaner than ever before, however, there is a hefty price tag to comply with EPA regulations.

Read more about wholesale power cost increases on p. 1 here.

Do other utilities use a PCA adder?
Yes.  While the terminology may vary, most utilities have an adjustment for fluctuating costs related to power production and market purchases.  You may hear these referred to as a Fuel Adjustment Clause or a Wholesale Power Adjustment but they are fundamentally the same.

Are others paying higher prices?
Yes.  Investor owned utilities, municipal utilities, and other cooperatives are also subject to increased market costs.  Those with fuel adjustment clauses will utilize them as a way to offset cost increases.  Other utilities may file rate increases which require more time to enact and is a more permanent way of recouping additional costs.  Currently, every major investor owned utility has rate increase proposals under review by the PUCO.

What is Hancock-Wood doing to minimize this volatility?
Through our membership in Buckeye Power -- a generation and transmission cooperative -- Hancock-Wood is able to take advantage of economies of scale within the energy and capacity market that it would not otherwise be able to.  Additionally, Hancock-Wood is actively involved in the legislative process to represent your interest in legislation that results in driving your cost up.  You, too, can take a role in this process through ACRE.

How is the PCA billed?
The PCA is applied to all kilowatt hours consumed and will be in effect for all rate schedules.  A cost increase will appear on a member bill as a PCA charge while a cost decrease would appear as a PCA credit.  You will find this listed as an item in the "Details" section of your bill.

If I’m not using more energy, why does my PCA go higher?
PCA can fluctuate based on variability and in the fuel cost component of the wholesale portion of your bill; fuel cost represents approximately 50% of your wholesale cost.  The volatility of coal prices and natural gas in the market can impact the PCA rate of your monthly charge even though your energy consumption does not rise as much.

How long will the PCA be affecting my power bill?
It is incredibly difficult to predict.  The PCA rate is currently being assessed by Hancock-Wood on a monthly basis, but over the past several years, energy prices have increased dramatically in response to natural gas, crude oil, and coal rising to record levels.  Once wholesale energy prices decrease, you can expect the PCA to decrease accordingly.

Why doesn't Hancock-Wood just cut its budget somewhere else?

We have, but those cuts are not enough to avoid the PCA.  About 55 cents of each dollar we receive from members is used to purchase the power needed to serve you.  Remember, there was a time when the PCA was a credit on bills -- perhaps that day will come again, but we do not know for sure.

Why doesn't Hancock-Wood just "eat" these increases?

We are a non-profit electric cooperative owned by the members we serve.  There are no other sources of revenue to pay bills incurred to generate electricity except from the members who use the electricity.  Hancock-Wood also has additional operating costs that it must fund in order to keep your lights on at the distribution level.

How can I reduce my bill?
Conserving energy is the best option for reducing one’s electric bill.  Adjusting your thermostat, and adding home insulation are just a few inexpensive ways to reduce energy consumption.  Visit the Saving Energy section of our website to get more ideas.