Every utility bill I look at has a purchased power adjustment or fuel adjustment clause. It's usually one of the largest riders on the bill. I always assumed it was calculated correctly since it's a PUC-approved formula. But someone told me these riders can be misapplied. How would you even verify the math on a purchased power adjustment?
Purchased power adjustment clause — how to actually verify the math
The purchased power adjustment (PPA) or fuel cost adjustment (FCA) is calculated by the utility based on a formula approved by the PUC. The per-kWh rate changes monthly or quarterly. You can verify it by looking up the utility's monthly PPA filing with the PUC — most utilities file the actual per-kWh rate each month. Then multiply that rate by your client's kWh usage for the period. If the amount on the bill doesn't match, you've found an error. It's rare but I've seen it happen when the billing system applies the wrong month's PPA rate, especially during billing period transitions.
The bigger audit opportunity with PPAs and fuel adjustments isn't the calculation itself but whether the correct rate class adjustment is being applied. Some utilities have different PPA rates for different customer classes — industrial customers might have a lower adjustment than commercial. If your client is on the wrong customer class code in the billing system, they could be getting the wrong PPA rate. This is an extension of the rate classification error: even if the base rate is correct, the rider rates may be wrong if the customer class code is wrong. Check the PPA rate on the bill against the filed rate for your client's specific rate schedule.
That's a dimension I hadn't considered. Going to start comparing PPA rates on the bill against the filed monthly rates for the correct rate schedule. If the class code is wrong it would affect not just the PPA but every rider that varies by customer class. That could add up fast.