Anyone else notice Puget Sound Energy's fuel adjustment clause is showing negative adjustments the past three months? Our Seattle manufacturing client is seeing credits of $0.0087/kWh on Schedule 40. I've been doing this for 8 years and can't remember seeing sustained negative fuel adjustments. Natural gas prices are down but this seems excessive. Wondering if PSE over-collected earlier in the year and this is the true-up.
PSE fuel adjustment clause going backwards?
David, NV Energy had similar negative adjustments last year when natural gas spot prices crashed in Q4. The fuel clause mechanisms are designed to flow both directions. PSE probably locked in higher-priced gas contracts early in the year and now market prices are below their baseline. The negative adjustment should continue until they work through the over-recovery.
Cliff's explanation makes sense. We saw the same thing with Rocky Mountain Power in Utah during the 2016 gas price collapse. The key is making sure PSE's fuel procurement was prudent in the first place. If they're over-hedged or bought expensive long-term contracts when cheaper options were available, that's grounds for a challenge.
This is actually good timing for large customers. If PSE's negative fuel adjustments continue into 2019, it might be worth locking in fixed-price contracts now while the effective rates are artificially low. We're seeing some aggressive offers from competitive suppliers who are banking on fuel costs staying depressed.