Power Cost Adjustment
1. What is it?
A power cost adjustment used by Investor Owned Utilities, Cooperatives and Municipalities enables these entities the ability to account for uncontrollable fuel and purchased power costs.
2. Why is it important?
Coal, natural gas and oil make up the majority of the fossil fuels that are used to make electricity. A variety of factors affect these costs, including weather and global supply and demand. Another factor, which changes with the passing seasons, is a customer's consumption/usage. Without a power cost adjustment, Investor Owned Utilities, Cooperatives and Municipalities do not have a proper mechanism for matching revenues to expenses due to volatile energy prices.
Original source can be found here
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