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TEP Updates

PPFAC

The Arizona Corporation Commission (ACC) has approved an adjustment to the Purchased Power and Fuel Adjustment Charge (PPFAC), which passes through the actual cost of fuel and purchased power to customers with no mark-up.

Customers served on TEP’s Low Income and Medical assistance programs are exempt from PPFAC charges. Additionally, customers of TEP’s Bright Tucson Community Solar program are not required to pay the PPFAC for solar power purchased through the program.

What is the Purchased Power and Fuel Adjustment Charge (PPFAC)?

The PPFAC is a monthly charge that passes through changes in the costs of fuel and purchased power to customers without any markup. TEP earns no profit from this charge. The PPFAC charge is based on usage and reflects changes in energy costs not included in summer or winter base power supply rates.

Where did this charge come from?

The PPFAC was approved by the Arizona Corporation Commission on December 1, 2008. It began appearing on customer bills in January 2009. However, since then, the PPFAC rate was set at zero because of an ACC-approved credit called the Fixed Competitive Transition Charge (Fixed CTC) that was applied to customer accounts.

The Fixed CTC was approved by the ACC in November 1999 and collected from customers through December 2008. It was intended to recover TEP's costs related to electric competition.

Approximately $60 million collected through the Fixed CTC were refunded to customers through a bill credit that offset the PPFAC for more than three years. The credit expired in November 2011.

During its open meeting on March 27, 2012, the ACC approved an adjustment to TEP’s PPFAC, which is set at a rate of $0.007696 per kilowatt hour beginning on April 1, 2012 and continuing at that rate through March 31, 2013.

How will this affect my bill?

This change will result in an increase of $6.77 to the monthly bill of a residential customer with an annual average usage of 880 kilowatt hours (kWh) per month. During summer months, the recent approval will result in an increase of $8.47 to the monthly bill of a residential customer with average usage of 1,100 kWh. During winter months, the recent approval will result in an increase of $5.23 for a residential customer with average usage of 680 kWh.

How will the PPFAC appear on my monthly bill?

The PPFAC appears on your bill under the heading “Power Supply Charges,” which also lists your summer and winter base power supply rates.

How long will this charge remain on my bill?

The PPFAC will be adjusted each April to reflect recent and projected power costs as well as other ACC-approved charges and credits.

Do all customers have to pay this charge?

No. Customers served on TEP’s Low Income and Medical assistance programs are exempt from PPFAC charges.

Additionally, customers of TEP’s Bright Tucson Community Solar program are not required to pay the PPFAC for solar power purchased through the program.

Will my bill be lower if I purchase solar power through the Bright Tucson Community Solar program?

The program is not designed to reduce customers' electric bills. Rather, it offers an easy, affordable way to meet your electric needs with clean, renewable energy. Participants in the Bright Tucson Community Solar program can purchase 150 kilowatt hour (kWh) "blocks" of solar energy produced by local photovoltaic (PV) arrays. Each block will replace the charges for an equivalent amount of traditional power at a cost that adds $3 apiece to participants' monthly bills. Because solar power currently costs more than traditional energy resources, the energy blocks available from the Bright Tucson Community Solar Program will add to your monthly electric bill. But the price you'll pay for each block will remain fixed for 20 years under ACC-approved program rules, so you may realize future savings if the cost of traditional energy resources increases. See the Bright Tucson Community Solar page for more information.

Do other utilities have charges like this?

Yes. Similar components are included in the electric rates of TEP’s sister company, UniSource Energy Services, as well as in those charged by Arizona Public Service and many other electric utilities.

How is the PPFAC calculated?

The PPFAC has two parts: the “Forward Component” and the “True-up Component.” The “Forward Component” consists of the forecasted fuel and purchased power costs for the year commencing on April 1 and ending on March 31 of the ensuing year, less the average Base Cost of Fuel and Purchased Power reflected in base rates. The True-up Component reconciles any over-recovered or under-recovered amounts from the preceding PPFAC year to be credited to, or recovered from, customers in the next PPFAC year.