Q: What is the Lost Fixed Cost Recovery (LFCR) charge ?

The Lost Fixed Cost Recovery (LFCR) charge, approved in 2013 by the Arizona Corporation Commission (ACC), will partly offset the revenue TEP loses when customers reduce their bills through our conservation and renewable energy programs. Without the charge, TEP would be unable to recover the full cost of system improvements that serve all customers, regardless of usage.

This surcharge adds about $1.60 to the average monthly bill of a typical residential customer. That estimate reflects average monthly usage of about 800 kilowatt hours (kWh), so businesses and other customers who use more power will pay a higher LFCR fee.

Q: Why does TEP need an LFCR charge?

Rooftop solar arrays, compact fluorescent light bulbs and efficient air conditioning systems have helped customers save money on their monthly electric bills. These savings limit TEP’s ability to recover our service costs, including many ‘fixed’ costs that aren’t reduced when customers use less power.

Examples of fixed costs include power line repairs, metering expenses and the cost of installing and maintaining the electric grid.  Our system covers more than 1,100 square miles and includes more than 2,000 megawatts of generating resources, more than 9,000 miles of underground and overhead power lines and more than 100 substations.

The LFCR will help ensure that the success of our energy efficiency and renewable power programs does not compromise our ability to cover our fixed service costs.

Q: Who must pay this charge?

Residential, small general service and large general service customers are subject to the LFCR. Customers on traffic signal, street lighting, lighting service, water pumping, and large light and power rate plans do not pay an LFCR charge because their rates already incorporate the recovery of fixed costs.

Q: How is the LFCR calculated?

The LFCR is based on a percentage of the applicable billing amount of a customer’s monthly bill. Under current rates, a residential customer with monthly usage of 785 kilowatt hours (kWh) would pay about $95 in Basic Service and Energy and Power Supply charges.

Percentage rate

x

Applicable billing amount

=

Monthly LFCR surcharge amount

0.012068 (Energy Efficiency)

x

$95.19

$1.15

0.004406 (Renewable Energy)

x

$95.19

$0.42

Total LFCR charge

$1.57

The LFCR is listed under “Surcharges” on your monthly bill.

Q: Will the amount of my LFCR charge change?

Yes. The LFCR will vary each month with individual usage, except for customers who select the fixed option.  Additionally, the usage-based rate used to calculate the LFCR will be updated annually to reflect revised estimates of the revenue lost to energy efficiency and renewable power programs.