Ray C. from Louisville here. I've been tracking LG&E's fuel adjustment clause for six months and it changes every single month, sometimes by significant amounts. Last month it dropped $0.0089/kWh, this month up $0.0134/kWh. Is this typical for most utilities or is LG&E just more volatile? Trying to help clients understand why their bills fluctuate so much even with steady usage.
Fuel adjustment clause frequency - why monthly changes?
Jack P., also Louisville. LG&E's fuel clause has definitely been more volatile lately. I think it's tied to natural gas prices and coal transportation costs. Most utilities I work with do adjust monthly, but the swings aren't usually this dramatic.
Mike S. from Lexington. KU has similar monthly adjustments but you're right Ray, LG&E seems more volatile. I think they have a different generation mix - more natural gas peakers maybe? When gas prices spike it hits the fuel clause harder.
Dale H. in Indianapolis. IPL does quarterly fuel adjustments instead of monthly, which smooths out some of the volatility. The downside is when fuel costs spike, customers don't see relief as quickly when prices drop again.
Randy Dawson here. Great discussion on fuel clauses - this is one of those tariff components that can really impact customer bills but gets little attention. Ray, the monthly volatility you're seeing is pretty typical for utilities with significant natural gas generation. The fuel clause is designed to pass through actual fuel costs, so when gas prices swing wildly like they have been, customers feel it immediately. Some utilities use three-month rolling averages to smooth the adjustments, others pass through the raw monthly costs. You can usually find the specific calculation methodology in the tariff's general terms or in a separate fuel clause rider. For explaining it to clients, I like to show them the actual natural gas price trends alongside their fuel clause changes - the correlation is usually pretty obvious.
Randy, that's a great approach with showing the natural gas correlation. I'll start tracking NYMEX prices alongside the LG&E fuel clause to show clients. Makes the volatility much easier to understand when you can see the underlying commodity driving it.
Chester L. from Burlington, VT. Green Mountain Power does quarterly adjustments but they also have a significant hydro and renewable portfolio, so their fuel clause is much more stable. Geography and generation mix make a huge difference in how these clauses behave.
Danielle F. from Baton Rouge. Entergy Louisiana does monthly fuel adjustments and they've been all over the place too. After Hurricane Ida, the fuel clause spiked because they had to buy expensive replacement power while plants were down. Sometimes it's not just commodity prices but system reliability issues too.