Purchased Power Adjustment
At Valley Rural Electric Cooperative, we do our best to anticipate wholesale power costs in the development of our electric rates. We are proud to say that we did not have to institute an overall rate increase from 1992 until October 2007. Unfortunately, current electric prices are very volatile.
Valley REC obtains wholesale power from its supplier at a rate of 6.0 cents per kilowatt-hour (kWh). This rate is based on historical data on energy costs. Set in advance for a multi-year contract period, such an averaged rate cannot reflect unpredictable changes and fluctuations in the present wholesale power market. These factors may include drastic weather patterns, such as hot or cold temperatures, that increase energy use or dramatic increases in the price of fuels that affect every business sector.
(Effective October 1, 2007)
Whenever the co-op's wholesale power rate exceeds 6.0 cents per kWh, consumers will be charged
a purchased power adjustment (PPA) to make up for the shortfall. If wholesale power costs are
less than 6.0 cents per kWh, consumers will receive a credit on their bills.
The purchased power adjustment is added to consumer bills only when the cost of electricity exceeds the base kilowatt-hour price calculated in our rates. It is imposed across the board so that consumers who use more electricity pay more of the freight. Each member is asked to pay only his or her fair share of the additional costs. It is the most equitable method of obtaining the revenue needed to meet the expense of providing power to our consumers.