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Discussion

A fuel and power purchase cost adjustment allows a utility to recover

  • A.changes in fuel and purchase prices between tariff orders
  • B.the cost of its own generating plant
  • C.losses arising from theft of electricity
  • D.the return on equity approved by the regulator

Answer: A

Correct answer: changes in fuel and purchase prices between tariff orders

Fuel and purchased power prices move faster than tariff orders can be revised, and the utility can neither control them nor absorb them. The adjustment passes the difference through, up or down, between one order and the next, which keeps the utility solvent without reopening the whole tariff every quarter.

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