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Fuel and purchased power adjustments: the increase that skips the hearing

Most of the increases tracked on this site go through a rate case: a filing, a hearing, a decided percentage, all on a public docket. A different kind of increase does not. It usually shows up on the bill as a fuel adjustment clause, a fuel cost recovery, an energy cost recovery rider, or a purchased power adjustment, and in some years it adds more to a bill than a base rate case does, without ever appearing as a pending case here.

What the rider is

A utility does not mark up the fuel or purchased power it buys to run the grid; it passes that cost through at what it actually paid. Base rates bake in an assumed fuel cost, set the last time the utility had a full rate case, but actual coal, natural gas and purchased power prices move every month. The rider closes the gap between the assumed cost in base rates and what the utility actually spent.

Why it skips the hearing

Full base rate cases are slow and expensive to litigate, with testimony on the utility's return on equity, its capital spending and its cost allocation among customer classes. States long ago decided that reopening all of that every time gas prices move made no sense, so most commissions approved a fuel adjustment mechanism once, as a formula and a filing schedule, and now review it on a much lighter annual or semiannual cycle that mostly checks the arithmetic rather than the whole rate structure. That is why a fuel rider can add real money to a bill without a docket that looks anything like the base rate cases tracked on this site.

How it gets trued up

Because the rider is based partly on a forecast, it is almost always wrong in one direction or the other, so commissions require a true-up: a later filing that compares what the utility actually spent on fuel to what it collected from customers through the rider, and adjusts the next period's charge to make up the difference, plus interest. Missouri's rule for its fuel adjustment mechanism is typical: it defines the true-up amount as the difference between the utility's actual fuel and purchased power costs and what it billed customers for the period, corrected in the following recovery period. If a utility collected too little because gas prices spiked, the shortfall shows up as a further increase later; if it collected too much, customers get a credit.

Real examples

Georgia Power's fuel costs had run ahead of what was built into rates for two years running when the Georgia Public Service Commission approved its 2023 fuel cost recovery request. The approved rider added about $15.94 a month to a typical residential bill using 1,000 kWh, effective June 1, 2023, and covered both the two years of already incurred costs and two years of projected costs ahead, spread out to soften the impact. No base rate case was involved.

Duke Energy Progress in North Carolina files a fuel and rider adjustment every year, separate from a base rate case, reviewed annually by the North Carolina Utilities Commission. Its June 2023 filing proposed adding $5.98 a month, about 4.3 percent, to a typical residential bill starting December 1, 2023, almost entirely to recover the cost of fuel used to generate the utility's own power.

How to find it on your bill

Look for a line separate from the base energy or delivery charge, usually priced per kilowatt hour on its own, labeled some version of fuel cost recovery, fuel adjustment, energy cost recovery, or purchased power adjustment. The bill guide covers where this sits among the other charges on a typical bill.

Why this matters when this site shows nothing pending

If your bill jumped and there is no rate case listed for your utility, a fuel or purchased power rider, or something like it, is the likely reason. It moves on its own schedule, set by a formula the commission approved years ago, and it does not need a docket that looks like the base rate cases this site tracks case by case.

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