What Is The Fuel Cost Charge?

Posted: May 19, 2015

Alaska Village Electric Cooperative (AVEC) rates consist of three parts. The first is a fixed monthly customer charge of $5 for Small Power service. It is higher for Large Power, but only Small Power is discussed here. Almost 80 percent of our services are Small Power, which includes all residential and most commercial customers. Rates in Bethel are different, with the customer charge being higher and the energy charge being lower.

The customer charge covers the cost of the service drop to the customer, the meter and the basic billing cost.

The second component is the energy charge. This is 30 cents per kilowatt-hour (kWh) for the first 700 kWh and 20 cents for any kWh used above 700. The energy charge covers all of AVEC’s nonfuel costs: power plant operations, lubricating oil, depreciation, insurance, distribution system operations, generator overhauls, administration, debt service, collections and so on.

The energy charge is the same in all of our villages because, over time, those costs are the same in each village. Our average investment per customer is more or less the same, regardless of the village size. That is because larger, more-expensive equipment is needed in larger villages and smaller, less-expensive equipment is installed in smaller villages.

The third component is the fuel cost charge. This represents the actual fuel cost per kWh in each village. This cost is as low as 22.99 cents (in Shaktoolik) and as high as 56.72 cents (in Noatak, where the fuel must be flown in.) The average is 32.15 cents. In recent years, we have improved generating efficiencies and installed wind generation, which have stabilized the fuel cost charge. If you used 400 kWh in a month, your electric bill in a “typical” village would be:

Customer Charge                                    $5.00
Energy Charge (400 kWh x .30)           120.00
Fuel Charge (400 kWh x .3211)             128.44
PCE (400 x .4182)                                 – 167.28
                                             Total Bill         $86.16

That averages out to 21.54 cents per kWh, or about 45 percent more than urban Alaska. AVEC has worked hard to stabilize the fuel cost component of your electric bill, and has also done a pretty good job of keeping the nonfuel costs under control.

Looking back over the last 15 years, we reduced our rates by 2 cents a kWh in 2010, which has resulted in lower revenue of almost $1.5 million every year.

This is a complicated subject, but we get a lot of questions about how the electric bill is computed and we thought this would be useful in answering some of those questions.