Why is My Power Bill Higher?

If it seems like your power bill is high this summer, you’re right. Cullman Electric CEO Tim Culpepper and communications manager Brian Lacy sat down recently to talk about all of the issues behind the higher bills.

There is not a short, simple explanation for what’s causing high power bills. It’s a combination of factors locally and globally that are impacting Cullman EC members and our power provider, the Tennessee Valley Authority.

Increased energy usage

Most co-op members use more electricity when temperatures outside are extreme. In Alabama, the hottest summer months and coldest winter months have higher power bills as we use more electricity to stay comfortable inside our homes.

Nuclear power plant maintenance

Nuclear power plants — which produce 40% of TVA’s electricity and are also TVA’s lowest-cost electricity — require planned maintenance that can take weeks or even months during which the plant is offline and does not generate electricity. Maintenance windows are usually scheduled during the spring when demand for electricity is lower, so the power plant can be back online before energy demand increases during the summer.

Increased natural gas prices

Natural gas accounts for 26% of the electricity TVA generates, and the price of natural gas has more than tripled over the past year. Numerous factors — most notably the military conflict with Ukraine and Russia — have driven up the cost of natural gas around the world, making the electricity it produces more expensive.

An early start to summer

The highest summertime electricity demand comes during July, August and September when temperatures outside are typically the hottest. This year, summer started early. Temperatures in June were above normal, and TVA experienced record high demand for electricity. Unfortunately, two of TVA’s nuclear reactors were still offline, meaning TVA did not have access to its lowest-cost source of electricity until the maintenance was complete.

In order to meet the increased demand for electricity, TVA had to purchase electricity on the open market at rates far higher than what it would cost to generate at its nuclear power plants. TVA also had to increase generation at its natural gas power plants in order to provide enough electricity to serve all of the people and businesses across its seven-state service area.

TVA Fuel Cost Adjustment

Every month, TVA estimates how much it will cost to generate all of the electricity it will need to deliver to the local power companies (LPCs) it serves, including Cullman Electric Cooperative. At the end of the month, once TVA knows how much it actually spent, a fuel cost adjustment (FCA) is calculated. To avoid a major spike in retail prices, that fuel cost adjustment is spread across the kilowatt-hour rate for the next several months.

(Note: The fuel cost adjustment works both ways. There have been times when TVA’s actual fuel cost was lower than projected. When that happens, the FCA becomes a credit and reduces the kilowatt-hour price of electricity over the next several months.)

High temperatures + increased costs = high bills

When summer temperatures arrived early this year, and the nuclear power plants were still undergoing maintenance, TVA had to (1) purchase more expensive electricity on the open market and (2) generate more electricity using high-priced natural gas than it had predicted.

It’s summer, and all of us are using more electricity to cool our homes and businesses, and the electricity we are using costs more this year than it has in the past. That’s why power bills are higher than usual right now and will be for the next several months.

Cullman Electric Cooperative has not raised its rates. We are all having to pay more for the wholesale power that we buy. It stinks, but there is not much we can do about it. TVA’s nuclear power plants are running once again, producing reliable, low-cost power. Natural gas prices will continue to be a challenge for TVA, but once the scorching-hot summer heat subsides and we aren’t running our air conditioners all day, power bills should see some relief.

In the meantime...

One simple step you can take to reduce your home energy usage and expense is by bumping up the thermostat. Whether you normally like it 64 degrees or 74 degrees inside your home, raise your thermostat a few degrees and find a temperature setting that allows you to still feel comfortable while also reducing your power bill.