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June 2012
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Higher electric bills explained by more than just cold winter

BY DAVID ZOELLER dzoeller@paducahsun.com

Paducah Power System officials are hopeful conditions that have contributed to significantly higher electric bills this winter, including issues with its main source of power and extreme weather, will be brought under control soon and allow the utility to meet its long-term goal of providing stable rates to its customers.

The new generating units of Prairie State Energy Campus, Paducah Power's main supplier, have been off-line for periods of time as the plant goes through a shakedown phase, or "de-bugging," according to David Clark, Paducah Power general manager.

The plant being off-line resulted in Paducah Power having to pay more for wholesale power due to extreme conditions in January and February.

That shakedown phase is a normal part of starting up a new power plant, and usually lasts about two years, Clark said, adding that two-year period is about over.

"We hope by the end of this month about 90 percent of that shakedown process will be over for us," Clark said. "It's not like when you get a new automobile, you get in it and start driving and expect it to run. It (the power plant) runs for a while, then trips off, and you've got to fix that. There are a lot more systems, digital control circuits and things like that."

One of the factors that goes into determining a customer's bill is the Power Cost Adjustment. Power companies project what their wholesale cost for power will be in the coming months, Clark said. At the end of that period, they review it to see if their projections were right, too high, or too low. Paducah Power adjusts its PCA every quarter.

The PCA appears as a separate line item on customers' bills. For residential customers, the PCA peaked this winter at approximately 30 percent of the total bill, officials said.

"When the (Prairie State) plant is off-line, we're paying the bonds on the power plant, a plant that we get no energy from because it's off-line, and we've got to buy the energy on the open wholesale market," Clark said. "That is what caused us to have a high Power Cost Adjustment. The way things came together, the way the weather was in January and February was kind of like a 'perfect storm' that hurt us and hurt our customers," Clark said. "Right now our rates have kind of peaked up, mainly due to the PCA."

According to Andrea Underwood, director of community relations and marketing for Paducah Power, the PCA and base rate are combined to create the effective rate customers pay for kilowatt hours. "The PCA is the one that's going to fluctuate," Underwood said. "The PCA is tied directly to the performance and reliability of Prairie State. The better those two generating units perform, the lower our PCA and the lower our customer's bills will be."

According to Clark, when the shakedown phase is over, Prairie State is expected to reach a plant availability factor of 85 percent. When that is achieved, "we predict the PCA will average zero. Some months it will be up a little bit, but over the year it should average zero," Clark said. 

Before committing to Prairie State almost 10 years ago, the local utility purchased its power from the Tennessee Valley Authority. The decision to move away from TVA was made for several reasons, Clark said, including its aging, vintage 1952 equipment.

Paducah Power gets approximately 80 percent of its energy from Prairie State, and another 10 percent from its gas-fired peaking plant built on Schneidman Road in 2010. It has also contracted to purchase hydroelectric power generated in the future on sites on dams along the Ohio and Cumberland rivers, being developed by American Municipal Power, headquartered in Columbus, Ohio. Paducah Power also buys some hydro power from the Southeastern Power Administration.

The decisions were made as part of a long-term strategy to serve its customers, Clark said.

"We've had what I call rough parity with TVA (rates), but I'm hopeful once this plant gets out of its de-bug phase, things will straighten out for us and we'll have long periods of what we call rate stability."

Contact David Zoeller, a Paducah Sun staff writer, at 270-575-8676.


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